Life (general) Policy Riders, Provisions, Options and Exclusions
M has a whole life policy with a return of premium rider and a face amount of $100,000. At age 80 M died and to that point had paid $50,000 in premium. M's beneficiary will receive: A: $100,000 B: $150,000 C: $200,000 D: $500,000
A: $100,000 Even though M had a return of premium rider, the total amount paid to the beneficiary is $100,000 because the Return of Premium rider usually expires at a predetermined age of 60-65
Of the following policy provisions, which talks about exchanging value? A: Consideration B: Declaration C: Letter of Credit D: Mutuality of assent
A: Consideration The Consideration clause is the part of the contract that specifies the exchange of value between parties.
Another name for making an amendment to a policy is a(an): A: Endorsement B: Insuring Agreement C: Revocable Beneficiary D: Waiver of Premium Rider
A: Endorsement Another name for an amendment or change to a policy is an Endorsement.
Which of the following non-forfeiture options are automatic? A: Extended Term B: Surrender C: Reduced Paid-Up Insurance D: All of the Above
A: Extended Term Of the three non-forfeiture options, Extended term is the only automatic selection that occurs when a policy holder lapses a permanent policy. The other options must be elected by the owner.
Which of the following parties have the right to select death benefit Settlement Options? A: Policy owner B: Beneficiary C: The insurer D: None of the Above
A: Policy owner
At age 40, J purchased a whole life policy which had a face amount of $95,000 and an annual premium of $1,000. In addition, J decided to add a Return of Premium Rider when she purchased the policy. Sadly, at age 45 J died of heart attack. How much in proceeds with her beneficiary receive? A: $95,000 B: $100,000 C: $0 D: $190,000
B: $100,000 Because J had a policy with a return of premium rider the death benefit plus premiums were paid to the beneficiary. Seeing that the face amount was $95,000 and she paid an annual premium of $1,000 for five years before she died: $95,000 DB + $5,000 total premiums paid = $100,000.
return it for a full refund? A: Right of Rescission B: Free Look C: Consideration D: Satisfaction Clause
B: Free Look The Free Look provision allows the policyholder the right to return their policy back within a certain amount of time for a full refund of premiums.
Each of the following is true about the Suicide Clause EXCEPT: A: It is a temporary exclusion B: Suicide is covered immediately in a policy C: The Death benefit is paid if suicide occurs after a stated amount of time in the policy. D: If suicide occurs during the exclusion period, premiums are paid back to the beneficiary of the policy.
B: Suicide is covered immediately in a policy Suicide is covered after a certain period of time after the policy is issued and is never paid immediately after issuance.
Which of following would be a legal change that is part of the Entire Contract? A: Rider B: Insuring Clause C: Endorsement D: Incontestability
C: Endorsement An Endorsement is a legal change that becomes part of the entire contract.
Which type of policy may pay a policyholder a dividend when there is a surplus? A: Stock B: Registered C: Mutual D: Domestic
C: Mutual When a mutual insurer issues a participating policy a refund of excess premiums known as a dividend is paid to the policyholder.
The incontestability clause found in a life policy, allows the insurer to terminate a policy within _______ of issuance. A: Three Years B: Anytime C: Two Years D: One Year
C: Two Years The incontestability clause must be enforced by the insurer within two years of issuance
Which of the following are true regarding a Universal Life policy? A: The owner can take a loan B: The owner can withdrawal money C: The owner can pay flexible premiums D: All of the Above
D: All of the Above In a universal life policy, the owner can borrow money and pay flexible premiums. In addition, because UL premiums is the "insured's $", they are allowed to withdrawal cash value without paying it back to the insurer.
G purchased a policy many, many years ago. A few years after buying the policy, G decided to take airplane pilot lessons. One day while flying alone in a twin engine plane, G's plane crashed and he died upon impact. The proceeds will not be paid by the insurer because of which of the following clauses: A: Status B: Results C: Hazardous Occupation D: Aviation
D: Aviation If a policy has an exclusion for a pilot or passenger dying from a plane crash, it is known as an Aviation Exclusion.
Which of the following riders allow the policy owner to purchase additional insurance in the future without having to answer health questions? A: Payor Benefit B: Waiver Of Premium C: Return of Premium D: Guaranteed Insurability
D: Guaranteed Insurability The Guaranteed Insurability rider allows the policy owner to buy more life insurance at future dates without proving insurability.
Under IL law, the limit for the Accelerated Death Benefit is _____ of the face amount A: 100% B: 75% C: 50% D: 0%
B: 75% The Accelerated Death Benefit rider allows the insured to take 75% of their proceeds before they die, tax free.
Who has the right to change the mode of premium in a life policy? A: The Insurer B: The Policy owner C: The Insured D: The beneficiary
B: The Policy owner The policy owner has a right to change the mode of premium at any time.
A $10,000 life insurance policy with a Triple Indemnity clause has been in force for 3 years. The insured is injured in a train wreck and dies in a hospital 5 months later. The death proceeds payable under the policy are: A: $30,000 B: $20,000 C: $10,000 D: $0
C: $10,000 This policy will only pay the regular face amount of the policy because the insured died more than 90 days past the accident and is therefore no longer considered an accidental death.
Which dividend option will lower total annual premium cost? A: Endow the Policy B: Cash C: Premium Application D: All of the Above
C: Premium Application With the Premium Application dividend option, a cash dividend is applied towards the next year's premium in the policy, thus lowering overall premium cost from year to year.
Children, Spouse, and Non-family insureds are all forms of which type of rider? A: Other Insureds B: Primary Coverage C: Accidental Death D: Payor Benefit
A: Other Insureds To add spouse or children as a rider or to have a non-family insured added to a policy are forms of other insureds riders.
C has a life insurance policy with an Accidental Death and Dismemberment rider. C dies of an accident. What type of benefit is paid to the named beneficiary? A: Principal Sum B: Capital Sum C: Double Indemnity D: Triple Indemnity
A: Principal Sum A principal sum is paid because of an accidental death on an AD&D rider.
Which of the following policies would be most likely to have a Return of Premium rider? A: Whole Life B: Variable Life C: Variable Universal Life D: Adjustable Life
A: Whole Life It is common for insurers to offer Return of Premium rider on a whole life policy that stipulates if an insured dies before a certain age (60-65) the beneficiary receives the death benefit plus paid premiums.
In a participating policy, the dividend may be described as a return of excess premium caused by: A: favorable mortality rates and investment returns B: an error in the mortality or expense tables C: unproved insurance company expenses D: miscalculation of classification rates
A: favorable mortality rates and investment returns A dividend is a refund of excess premium that is available to policy holders because of favorable mortality and beneficial investments to the insurer. Keep in mind dividends are never guaranteed.
The part of an insurance contract limiting the scope of coverage is called A: Limitation B: Exclusion C: Eclipse D: Reduction
B: Exclusion An Exclusion limits the scope of benefits.
B owns and is insured by a policy that has one premium but also provides coverage for her spouse. B has: A: Double Indemnity B: Group Health Insurance C: Spouse coverage under an Other Insured Rider D: Long Term Care Rider
C: Spouse coverage under an Other Insured Rider Because B has one policy, one premium but her spouse as a added insured, it is considered a other insured rider.
All of the following actions are allowed in a whole life policy EXCEPT: A: Taking a Loan B: Surrendering the Cash Value C: Paying a policy up before age 100 D: Taking a Withdrawal
D: Taking a Withdrawal Whole life policies allow the policy owner to pay a policy off earlier than 100, take a loan or surrender the policy. The owner cannot take a withdrawal from a whole life policy because of the insurer's responsibilities and guarantees of the policy.
A policy owner has the right to take all of the following actions EXCEPT: A: designate more than five primary beneficiaries B: change the mode of premium payments C: select a Settlement Option D: name another person as the insured once the policy is in force.
D: name another person as the insured once the policy is in force. The owner can name as many primary beneficiaries as they desire, change the mode of premium at any time and select the settlement option. The policy owner cannot change the insured once the policy is in force
D has a policy from a participating insurer and receives a dividend. D would really like to increase her coverage without adding premium to the policy. The dividend option D should select is: A: Cash B: Paid-Up Addition C: One-Year Term Option D: Accumulation at Interest
B: Paid-Up Addition With the Paid-Up Addition dividend option, the policyholder is allowed to increase their death benefit amount without adding to the premium.
If a policy does not lapse at the end of the grace period because money is taken from the cash values to pay the premiums, what provision is in effect? A: Insuring Clause B: Extended Term Insurance C: Automatic Premium Loan D: Automatic Dividend Option
C: Automatic Premium Loan The Automatic Premium loan provision is not required, but found in some cash value building policies that keeps the contract in force by taking a loan automatically from the cash value to keep the policy in force.
K purchased a round trip airline ticket on a regularly scheduled flight to make an important business trip. On the way home, the plane suffered mechanical failure and crashed by which K died upon impact. The face amount of K's policy is $100,000 and his policy had both the double and triple indemnity accidental death benefit rider. How much will the beneficiary receive? A: $300,000 B: $200,000 C: $100,000 D: $0
A: $300,000 K's policy proceeds paid due to the plane crash will be $300,000. Since K purchased a ticket on a common carrier flight, the death is not excluded and because a plane crash is a rare occurrence, the triple indemnity benefit is paid to K's beneficiary.
As a young man, T purchased a policy naming his parents as a beneficiary. As T got older and was a very successful business person with his own family, he wanted to protect his estate by transferring ownership of a policy to a living trust. Which of T's ownership rights under a life policy would allow him to do such an action? A: Collateral Assignment B: Absolute Assignment C: Homework Assignment D: Change of Beneficiary
B: Absolute Assignment Absolute assignment would allow T to transfer his ownership rights to a living trust for estate planning purposes.
J has a life policy with the Accidental Death and Dismemberment rider. J suffered in accident in which she lost partial eye sight in one eye. Her policy will pay: A: Principal Sum B: Capital Sum C: Death Benefit D: Double Indemnity
B: Capital Sum A capital sum is paid on the slight loss of one eye for a policy with an Accidental Death and Dismemberment policy. The capital sum is usually a percentage of the principal maximum sum for qualifying losses.
Aviation, War, and Hazardous activities that are not covered by a life policy are known as: A: Examples B: Exclusions C: Riders D: Ratings
B: Exclusions Exclusions limit the scope of benefits to help the insurer make risk more predictable.
All of the following are CORRECT about withdrawals EXCEPT: A: A one time service charge may be applied when a withdrawal is taken. B: If a withdrawal amount exceed premium payment, it may be partially taxed. C: A withdrawal must be paid back to the insurer with interest. D: Variable Universal Life would allow an owner to withdrawal cash value.
C: A withdrawal must be paid back to the insurer with interest. A withdrawal is not a loan and therefore would not have to be paid back to the insurer with interest. Keep in mind that there may be limits on withdrawals, taxes and fees and are most commonly available on Universal Life contracts.
Before the insurer pays proceeds to a beneficiary, they find that the insured misstated their age. The insurer will: A: Not pay the death benefit B: Pay the full death benefit purchased because Incontestability has expired C: Adjust the death benefit to the insured's true age and pay proceeds accordingly D: Pay the death benefit, but it will be taxable.
C: Adjust the death benefit to the insured's true age and pay proceeds accordingly If Misstatement of Age is found at death, the insurer will adjust the death benefit to the insured's true age.
G has a policy with a face value of $5,000,000. Although G trusts her beneficiary, she would prefer that the proceeds not be paid lump sum. Which of the following settlement options should G select? A: Fixed Amount Option B: Fixed Period Option C: All of the Above D: None of the Above
C: All of the Above With a Fixed Amount Option, the proceeds are paid in a designated amount at regular intervals over time until all money guaranteed is paid out to the beneficiary. The Fixed Period Option shares the same guarantees but states the proceeds be paid out over time (5, 10, 20 years). In either case if the beneficiary dies, a contingent receives benefits.
C is a professional race car driver and the only way she can get approved for a life policy is if she is not covered by the policy if she dies while driving her race car. This limit on benefits is a(an): A: Rider B: Limitation C: Exclusion D: Accelerated Death Benefit
C: Exclusion The fact that C would not be covered if she died while driving her race car would be a form of an Exclusion.
All of the following are true about a Term Rider EXCEPT: A: It is commonly found on permanent insurance B: It will increase the cost of premiums C: If the coverage is permanent, the rider will then always be permanent D: Even thought coverage continues, the rider is over.
C: If the coverage is permanent, the rider will then always be permanent Term riders are temporary and will expire at a certain point in time, regardless of the policy actually purchased.
The Consideration Clause states that the insured must pay premium on time and the insurer must: A: give a refund of premiums B: pay more than the death benefit C: pay proceeds upon death of the insured D: give a discount of premiums after 5 years
C: pay proceeds upon death of the insured The insured must pay a premium and if so the insurer must pay proceeds upon death of the insured. This is found in the Consideration Clauses
Absolute assignment: A: Allows the policyholder to transfer partial ownership on a temporary basis. B: Changes the owner of a policy once insurable interest is proven. C: Allows the policyholder to take a loan from a term policy. D: Allows the policyholder to change the owner of a policy fully and on a permanent basis, regardless of insurance interest.
D: Allows the policyholder to change the owner of a policy fully and on a permanent basis, regardless of insurance interest. Absolute assignment is an ownership right that changes the policy owner on a full and permanent basis. Insurable interest is NOT required to assign a policy to another owner.
Each of the following is true regarding dividends EXCEPT: Each of the following is true regarding dividends EXCEPT: A: Dividends are offered by Mutual insurers through participating policies B: Dividends are paid tax free because they are a refund of excess premiums C: Insurers charge grossed up premiums based off potential loss and refund excess money if the insurer does not need the extra premium for actual loss D: Dividends are always guaranteed
D: Dividends are always guaranteed Dividends are never guaranteed because actual loss maybe unpredictable for an insurer and thus may need all premiums charged.
K has a life policy with a Waiver of Premium with Disability Income rider. K is disabled and has to wait a period of time before benefits are paid. This waiting period is known as: A: Time Limit Before Benefits B: Indemnity Clause C: Probationary Period D: Elimination Period
D: Elimination Period The Waiver of Premium with Disability income rider has an elimination period which is a waiting period from the date of disability that must be satisfied by the insured before benefits are paid.
Which of the following is true regarding insuring a spouse as an other insured rider? A: Coverage for the spouse is permanent. B: There will be separate premiums for each insured. C: Only the primary insured has to prove insurability. D: There is one policy insuring two different insured with two separate death benefits.
D: There is one policy insuring two different insured with two separate death benefits. With an other insured rider covering a spouse, there is one premium for all insured, insurability must be proven on all insured and coverage usually expires at age 65 for the spouse insured under the rider. There is one policy with two different insureds and death benefits.
The clause that defines and describes the scope of coverage and the limits of indemnification is known as the: A: Insuring Agreement B: Incontestable Clause C: Payor Clause D: Entire Contract Clause
A: Insuring Agreement The Insuring Agreement is the first page of the policy that contains coverage and limits.
Which of the following Settlement Options in a life insurance policy gives a beneficiary the most flexibility? A: Interest Only B: Fixed Period C: Fixed Amount D: Life Income
A: Interest Only The Interest Only settlement option is the most flexible option to receive proceeds because the beneficiary receives death benefit plus a minimum interest rate.
All of the following are exclusions in life insurance EXCEPT: A: War B: Aviation C: Reinstatement D: Suicide
C: Reinstatement Reinstatement is a provision that allows the policy holder the right to resume coverage. The other listed answers are all exclusions.
All of the following are correct about riders EXCEPT: A: Riders generally have to be added at application time. B: Riders will sometimes increase the cost of a policy. C: Riders are always permanent and never expire. D: Riders allow the policyholder to customize coverage.
C: Riders are always permanent and never expire. Riders are not always permanent and usually expire. Rider that expire before coverage ends are known as term riders.
The Free Look provision of a life policy begins when the: A: insurer mails the policy to the producer B: producer receives the policy C: insured receives the policy D: Grace Period Expires
C: insured receives the policy The Free Look begins when the policy is delivered to the insured.
What type of rider on a life policy would pay either a capital or principal sum for a qualified loss? A: Accidental Death Benefit Rider B: Triple Indemnity C: Double Indemnity D: Accidental Death and Dismemberment Rider
D: Accidental Death and Dismemberment Rider Depending on the cause and/or severity of the accidental loss either a principal or capital sum is paid under an AD&D rider.
Exclusions: A: Limit the scope of benefits B: Help insurers manage risk C: are not covered because they are actuarially unsound to insure certain risks D: All of the Above
D: All of the Above Exclusions limit the scope of benefits to help the insurer assess and cover risks more predictably.
H owns his only policy with a revocable beneficiary and wants to make a change to his policy. Who would have to sign off on H's change? A: H is the only party needed to sign for a change B: H's Beneficiary C: The Insured D: The Insurer
D: The Insurer Since H is owner/insured of a policy that has a revocable beneficiary, the insurer is the only party that must sign and authenticate the change.
L works as a crab fisherman on the Bering Sea. One day his foot gets caught in a trap and the waves pull him under the water, where he dies. L's beneficiary receives notice that no death benefit will be paid. Which of the following would describe the insurer's failure to pay proceeds A: The insurer never liked L B: The insurer committed an Unfair Practice and should be sued. C: The policy contained the Status Clause D: The policy contained a hazardous occupation exclusion clause
D: The policy contained a hazardous occupation exclusion clause. Some life policies exclude hazardous conditions from benefits. Because L had a very unsafe job, it is too risky for insurers to pay proceeds if L were to die on the job.
Lump Sum Settlement Options: A: Are allowed but are income taxable. B: Are allowed and are paid tax free C: Is not allowed over $100,000 of proceeds. D: Is usually the least common Settlement Option selected
B: Are allowed and are paid tax free Lump Sum is a tax free Settlement Option that can be selected by the policy holder regardless of the amount of money in the face value.
The Status and Results clauses are examples of: A: Exclusions B: War Exclusions C: Benefits D: Riders
B: War Exclusions Status and Results clause are both examples of War Exclusions.
An insured has a policy with a Waiver of Premium rider. The insured has suffered an illness that will prevent them for working for two years. When will their premiums be waived? A: Immediately B: After the first nine months of disability C: After the first six months of disability D: Never, premiums cannot be waived because illness is not a disability.
C: After the first six months of disability With a Waiver of Premium rider, the insured must usually prove that the disability is long term and has to pay premiums for the first six months of the illness. After the six months is satisfied, premiums are waived from then on out and the first six months are reimbursed to the insured.
Death from war is not covered under a life insurance policy. This is an example of A: Limitation B: Exclusion C: Reduction D: Exception
B: Exclusion War not being covered by a life policy is called an Exclusion, which limits benefits.
H and W are joint beneficiaries for a life policy. When collecting proceeds, H suffers a heart attack and dies. What will happen to W's benefits as a the only beneficiary alive? A: Receive the same income as if H was alive B: Received a 1/2 or 2/3 reduced benefit. C: Benefits stop for W because H is dead. D: Receive a settlement after legal action against an insurer
B: Received a 1/2 or 2/3 reduced benefit With a Joint and Survivor Settlement Option, when one beneficiary dies, the survivors continue to get benefits at a reduced amount (1/2-2/3-3/4) depending on the contract.
Which of the following is not true about the Accelerated Death Benefit? A: Proceeds are paid to the beneficiary after all Accelerated benefit is deducted B: The insured can take up to 75% of their face value for a qualifying condition. C: The insured has a right to take 75% of their face amount, but must pay taxes on proceeds taken D: Is a modern provision that was not found in policies forty years ago
C: The insured has a right to take 75% of their face amount, but must pay taxes on proceeds taken The insured has a right to take 75% of proceeds tax free which is deducted from the face value upon the insured's death.
B had a life policy issued three years ago and has recently died. Before paying proceeds, the insurer investigated B's policy and realizes that at the time of application B made a material misrepresentation. Which of the following actions will occur? A: B's proceeds are paid in full to the named beneficiary. B: B's proceeds are denied because of the material misrepresentation. C: Half of the proceeds are paid in a settlement with the beneficiary. D: The beneficiary will have to go to court and sue the insurer to collect proceeds
A: B's proceeds are paid in full to the named beneficiary. Since B's policy was issued three years ago, the insurer must pay the proceeds. The insurer has two years from issue to void a policy due to a material misrepresentation. This is known as the Incontestability period.
Which of the following conditions would allow the insured to receive Accelerated Death Benefits? A: Terminal Illness or Injury B: Loss of Occupation C: A stubbed toe D: Cancer that is not considered to be terminal
A: Terminal Illness or Injury The Accelerated Death Benefit can be paid to the insured for a qualifying terminal illness or injury.
B has a whole life policy and has taken a loan against the cash value. About a month after receiving the loan, B has died. Which of the following is CORRECT about how the insurer will handle the loan? A: The insurer will pay the proceeds with the loan amount deducted B: The insurer will pay the proceeds with the loan and interest amount deducted C: The insurer really liked B so the full death benefit will be paid D: The policy will never pay proceeds with an outstanding loan, even at death
B: The insurer will pay the proceeds with the loan and interest amount deducted The proceeds on B's policy will still be paid with the loan AND interested deducted from the face value.
Why do insurers place exclusions in life policies? A: there are never exclusions B: it is actuarially unsound to insure certain risks C: exclusions only apply to certain people and not all contracts D: None of the Above
B: it is actuarially unsound to insure certain risks Certain risks would be too high and devastating to an insurer and thus are considered to be actuarially unsound.
Which of the following may restrict a policy owner's rights? A: An assignee B: A primary beneficiary C: An irrevocable beneficiary D: A producer
C: An irrevocable beneficiary An Irrevocable beneficiary may restrict owner rights because any change an owner desires to make, the irrevocable beneficiary must sign and agree to the change.
F insured his only son as an other insured by a child's term rider. F's son is about to turn 18 and therefore is no longer able to insured as a rider. F wants to buy a new policy for his son, but four years ago, his son contracted Juvenile Diabetes. Which of the following actions should F take? A: Buy his son a new policy, even though it will probably be rated B: Let coverage lapse C: Convert the term rider to a permanent policy since the rider allows conversion regardless of insurability. D: None of the Above
C: Convert the term rider to a permanent policy since the rider allows conversion regardless of insurability. With a Child's Term rider, when the minor insured hits a specified age, they are allowed to convert from the rider to a permanent policy regardless of insurability.
A policy rider that allows the policyholder to purchase more insurance because of a new child being born is: A: Waiver of Premium Rider B: Accidental Death Benefit Rider C: Guaranteed Insurability Rider D: Return of Premium Rider
C: Guaranteed Insurability Rider The Guaranteed Insurability rider allows the policyholder to buy more life insurance for life event changes such as marriage, birth or adoption of a new child and can be purchased without proof of insurability.
In a life insurance policy, which of the following parts of the policy indicates that the insurance company promises to pay the Death Benefit as long as the insured pays their premiums on time? A: Beneficiary provision B: Incontestability provision C: Insuring Clause D: Premium Payment clause
C: Insuring Clause The Insuring Clause is the part of a life contract that establishes the promise that if the insured pays premiums on time, the insurer will pay proceeds upon death of the insured.
Each of the following is true about a children's rider EXCEPT: Each of the following is true about a children's rider EXCEPT: A: All children are covered with their own death benefit for one premium. B: A Child's Term Rider will expire at age 18-21. C: Newborn children are covered immediately under the rider. D: Sometimes a child has a right to converted upon age 18-21 to a permanent policy without proving insurability.
C: Newborn children are covered immediately under the rider. With a Child's Term rider, coverage for a newborn will usually apply after 15-30 days after birth
A Life Income Settlement Option: A: Guarantees that all of the proceeds will be paid out over the beneficiary's life. B: Will stop when the beneficiary dies and all proceeds unpaid goes to a contingent beneficiary C: Will stop when the beneficiary dies and all proceeds unpaid will be retained by the insurer D: All of the Above
C: Will stop when the beneficiary dies and all proceeds unpaid will be retained by the insurer In a Life Income option, all proceed payments stop when the beneficiary dies and any excess is retained by the insurer. Although not a guaranteed amount, if the beneficiary receives all proceeds and is still alive, they received income until they die.
Which of the following is considered to be a Term Rider? A: Guaranteed Insurability Rider B: Waiver of Premium Rider C: Payor Benefit Rider D: All of the Above
D: All of the Above. All of the listed riders are Term riders because they expire at some point in time.
All of the following information is stated in the Insuring Clause EXCEPT: A: the Settlement Option under which benefits will be paid B: the amount of benefits that will be paid C: when benefits will be paid D: to whom benefits are paid
A: the Settlement Option under which benefits will be paid The Settlement Option selected by the applicant is not listed in the Insuring Clause. The beneficiary information and the amount of proceeds paid are listed in the Insuring Agreement.
An insured has an AD&D rider on their life policy and has an accident. The insurance company has paid a principal sum. Which of the following losses would qualify the insured for a principal sum? A: Loss of primary right hand of the insured B: Loss of use of one leg C: Loss of both legs D: Partial sight loss in one eye
C: Loss of both legs A Principal sum paid on an Accidental Death and Dismemberment (AD&D) rider is loss of two or more limbs, permanent loss of sight in both eyes or accidental death.
D has 7 children and they are all insured under his policy as riders. Which of the following is true? A: Every child has a separate premium that is added into D's policy B: All 7 children are covered for one amount with each having their own death benefit as a rider. C: This type of coverage is impossible D: All of the Above
B: All 7 children are covered for one amount with each having their own death benefit as a rider. With a child's term rider all children are covered under the parent's policy for one premium with each child having their own death benefit amount
F has a policy delivered and is unhappy with it. Which of the following clauses allows F to send the policy back the insurer for a full refund? A: Free Insurance B: Free Look C: Free Inspection D: Free Coupon
B: Free Look The Free Look provision allows the policyholder the right to return their policy back within a certain amount of time for a full refund of premiums.
An insured and primary beneficiary are driving in the same car on a highway. It was raining really hard that day and the insured lost control of the car and hit the barrier. When the paramedics showed up to the accident, the insured had died but they were able to put the primary beneficiary on life support. How will the insurer settle the proceeds? A: The primary beneficiary will still receive the money. B: The primary must clearly outlive the insured by a certain number of days to collect proceeds. C: The proceeds are place in probate. D: The contingent beneficiary receives the proceeds.
B: The primary must clearly outlive the insured by a certain number of days to collect proceeds. To collect proceeds under the Uniform Simultaneous Death Act, the primary beneficiary must clearly outlive the insured by 30, 60, or 90 days depending on the contract to collect proceeds
Which of the following best describes a Return of Premium rider that is added to a permanent life policy? A: At no matter what age the insured dies, the premiums plus death benefit are paid out. B: The Return of Premium is usually added to the policy at no extra cost. C: It is an increasing term benefit rider to mirror premium payments that pays out in addition to the face amount if an insured dies before a predetermined age. D: All of the Above
C: It is an increasing term benefit rider to mirror premium payments that pays out in addition to the face amount if an insured dies before a predetermined age. When added to permanent life insurance, the Return of Premium rider utilizes a Increasing term rider as a benefit to mirror exact premium payments made until a certain age so that if the insured dies within the term rider, proceeds plus premiums are paid.
The Suicide Clause is known as a(an): A: Law B: Exclusion C: Temporary Exclusion D: Rider
C: Temporary Exclusion Since suicide is covered by a life policy after a certain period of time (usually two years of issuance), it is known as a temporary exclusion.
has had a whole life policy for 50 years and is now 70 years old. Because of the tough economy, T can no longer afford his annual premiums but still wants permanent insurance. T's agent should advise her to: A: Surrender the cash value, take the money and run B: Convert to extended term and keep the same face value C: Use the existing cash value to pay up the policy and reduce the face amount, but still have permanent coverage and build cash value D: Replace the policy and get a new commission
C: Use the existing cash value to pay up the policy and reduce the face amount, but still have permanent coverage and build cash value. T would be best served to use the Reduced Paid-Up option which is the only non-forfeiture options where cash value continues to accumulate and is permanent protection.
H let their policy lapse and is now asking the company for reinstatement. Which of the following will occur? A: H may have to pay all back premiums plus interest B: H may have to prove insurability to be reinstated. C: The insurer may deny coverage due to a reasonable cause D: All of the Above
D: All of the Above The insurer can deny reinstatement based on underwriting which may be required for reinstatement. If H was to be reinstated, premiums plus interest would like have to be paid back to restore the policy to its original status.
Each of the following is true about the Misstatement of Age and Gender clause in a life policy EXCEPT: A: The insurer has a right to adjust the policy if the insured has lied about age or gender and the fact is found while the insured is still alive. B: If an insured commits this form of misrepresentation, upon death, the insurer will adjust the death benefit of the policy. C: If the insured misstated their gender, the benefit will be adjusted according to birth sex. D: If the insured commits this form of misrepresentation, upon death, the insurer will adjust the premium of the policy.
D: If the insured commits this form of misrepresentation, upon death, the insurer will adjust the premium of the policy. If Misstatement of Age or Gender is found at death, the insurer will adjust the death benefit to the insured's true age or gender NOT the premium.
None of the following are level premium policies EXCEPT: A: Universal Life B: FPDA C: Universal Variable Life D: Ordinary Whole Life
D: Ordinary Whole Life Ordinary/Straight whole life policies have fixed premiums. The other listed answers all have flexible premiums.
K has a $100,000 death benefit and has become terminally ill. K decides to use his Accelerated Death Benefit option and takes 75% of his proceeds before he dies to take a trip around the world. When K dies his beneficiary will receive? A: $25,000 B: $100,000 C: $50,000 D: $0
A: $25,000 Since K took 75% when terminally ill under the Accelerated Death Benefit provision and received $75,000 that amount is deducted from the proceeds when K dies.
J has a term policy and let it lapse. A year later, J applies for reinstatement. The insurer is most likely to: A: grant reinstatement as long as J is still healthy and pays back premiums due B: grant reinstatement regardless of insurability C: deny reinstatement because of J's religion D: deny reinstatement because it is term insurance
D: deny reinstatement because it is term insurance J's policy will not receive reinstatement because term policies have no cash value and will immediately lapse after the grace period expires.
Each of the following is true about policy owner rights EXCEPT: A: At least once a year, the owner must consult the insured if they want to make changes to the policy B: The owner can make changes to a policy without insured's consent C: The owner can borrow all of the cash value out of a policy D: The owner can change the mode of premium at any time
A: At least once a year, the owner must consult the insured if they want to make changes to the policy
A producer could best explain the Free Look provision of an insurance policy by telling a prospect which of the following? A: The insurance company will underwrite the policy only after examining the application for a specified period of time. B: The insurance company may withdraw coverage if it discovers adverse information about you within a specified time after underwriting the policy. C: Within a specified time after you receive the policy, you may retire it and receive a full refund of premiums paid. D: Any time after the policy is issued, you may choose not to accept it and receive a full refund of premiums paid.
C: Within a specified time after you receive the policy, you may retire it and receive a full refund of premiums paid. The Free Look provision allows the policyholder the right to return their policy back within a certain amount of time for a full refund of premiums.
Which of the following is true about a long term care rider? A: It will decrease premiums B: It will pay nursing benefits in addition to the death benefit. C: The agent must write the Long Term Care Rider as a separate policy. D: If the insured uses the LTC rider benefit, it will be deducted from the proceeds when the insured dies.
D: If the insured uses the LTC rider benefit, it will be deducted from the proceeds when the insured dies. The LTC rider is considered to be an accelerated death benefit and therefore any money the insured uses from the death benefit for nursing care is deducted of the proceeds at death.
When applying for a policy, C told the agent that they did not smoke, when in reality, C smokes a pack of cigarettes a day. C died within one year of issuance and upon inspection the insurer found that C was in fact a smoker at application time. Which of the following actions will take place? A: The insurer will rescind the policy benefits and paid premiums back to the beneficiary. B: The insurer will pay the proceeds because C had three young children. C: The insurer company will not pay the death benefit and keep all premiums because C committed fraud. D: The insurer will pay the proceeds because of the Incontestability provision.
A: The insurer will rescind the policy benefits and paid premiums back to the beneficiary. Because C committed a material misrepresentation at the time of application and the insurer found that within 2 years of issuance, the insurer would deny the death benefit and refund all paid premiums under the Incontestability Clause.
G, who is 25 years old, purchased a life policy with the guaranteed insurability rider. Five years later G is able to buy an additional $5,000 of death benefit without proving insurability. At what age will G have to pay premiums based off on the additional $5,000. A: Age 25 B: Age 30 C: Age 100 D: The insurance company will dictate premium age.
B: Age 30 Since G can buy the extra coverage in five years, he will be 30 years old and the additional coverage is based off attained age without proving insurability.
B has a permanent policy that has endowed at age 85. Which of the following scenarios would make this possible? A: B has term life and the policy expired. B: B has a whole life policy and used a dividend to endow the policy sooner than age 100. C: B had a universal life policy and let it lapse. D: The insurer has reduced the endowment age because B pays his premium on time.
B: B has a whole life policy and used a dividend to endow the policy sooner than age 100. When the policyholder selects the endow the policy option as a dividend selection for a permanent policy, the endowment age is accelerated sooner than age 100.
G purchased a life policy with a $100,000 death benefit. G struggled for a year with a Alzheimer's disease and recently died. Although the death benefit is $100,000, the beneficiary only received $80,000. Which of the following would be described what might have occurred? A: The death benefit was partially taxable. B: G had a long term care benefit which deducted some of the face amount to pay nursing cost. C: The insurance company deducted money for processing the death benefit before payment. D: The agent received a portion of the proceeds when G died for their hard work.
B: G had a long term care benefit which deducted some of the face amount to pay nursing cost. Since G suffered from Alzheimer's disease, part of the death benefit went for nursing care due to G having a Long Term Care Rider. When an insured uses the LTC accelerated benefit, the portion taken to pay nursing expense is deducted from the death benefit.
R has applied for a life policy and has made a premium payment at application. R has given: A: Guaranteed coverage B: Initial Consideration C: Free Look Notice D: Mode of Premium selection
B: Initial Consideration Initial Consideration takes place when the insured pays at application time and a complete offer is sent to the insurer.
G who owns her own policy wants to take a loan from the cash value, but her beneficiary must be notified and sign off on the loan. G's beneficiary is A: An assignee B: Irrevocable Beneficiary C: Revocable Beneficiary D: A judge
B: Irrevocable Beneficiary An Irrevocable beneficiary may restrict owner rights because any change an owner desires to make, the irrevocable beneficiary must sign and agree to the change, such as borrowing money from cash value.
When a applying for a policy with an Other Insured rider, underwriting: A: Will insure anyone no matter what their health is. B: Is done on each and every insured to be covered. C: Will rate everyone regardless of insurability. D: Refuse to issue the policy.
B: Is done on each and every insured to be covered. When other insureds are added as riders, each person will be assessed for risk by underwriting.
If a father applies for insurance on the life of his minor child such that his death will result in all premiums being paid until the child reaches adulthood, he has purchase which of the following Riders? A: Guaranteed Insurability Rider B: Juvenile Payor Benefit Rider C: Convertible Term Rider D: Jumping Juvenile Rider
B: Juvenile Payor Benefit Rider. If the father, who is the premium payor, were to die while his child was a minor, premiums would be waived until the child was ages 21-25 because of the Juvenile Payor Benefit Rider.
All of the following statements are true about Reinstatement EXCEPT: A: Only cash value policies can be reinstated. B: Only term policies can be reinstated. C: Insurers have a right to deny reinstatement because a insured has suffered a critical illness since lapse. D: Policyholders may have to pay all back premiums and interest to reinstate a policy
B: Only term policies can be reinstated. Term policies can never be reinstated. Cash value policies are the only contracts that have rights to reinstate but the insurer may require proof of insurability and payment of premiums and interest.
R has let his whole life policy lapse. Which of the following will take place? A: His policy is gone forever and cannot be reinstated. B: R's policy automatically goes on extended term in which he has the same face amount and the cash value determines how long coverage is for C: R's policy is converted to a reduced paid up contract which builds cash value within a permanent, reduced face amount policy. D: R's policy surrenders and he pays taxes on the excess over payment
B: R's policy automatically goes on extended term in which he has the same face amount and the cash value determines how long coverage is for When a permanent policy lapses it automatically goes on extended term where the insured keeps the same face value and the amount of cash value determines how long coverage will continue for. Note that if the insured lives a long time, or they did not have much cash value at the time of lapse, the policy may expire under extended term.
If a Life insurance policy is lapsed, it may be put back into force from its original date of issue under which of the following clauses? A: Grace Period B: Reinstatement C: Insurability D: Free Look
B: Reinstatement The Reinstatement provision of a life policy allows a policyholder to put a lapsed policy back into force as if coverage was never lost.
The extra premium for a Juvenile Payor Benefit Rider would be based off which party? A: A Minor Insured B: The Applicant C: The Beneficiary D: The Owner and Insured's Joint Average Age
B: The Applicant The applicant of a policy which has the Payor Benefit rider will be the parent or guardian and premiums are based off the applicant's age, not the minor insured.
Each of the following is true regarding the Free Look Provision EXCEPT: A: The insured has usually 10, 20, or 30 days from delivery to return the policy for a refund. B: The Free Look is a provision found in life contracts that allows the insured to send a policy back at any time for a refund. C: The insured can send a policy back during the free look period for any reason they choose. D: When exercised within the proper time frame, the free look provision states that the insured receive a full refund of all premiums paid.
B: The Free Look is a provision found in life contracts that allows the insured to send a policy back at any time for a refund. The Free Look provisions starts from delivery and is usually 10, 20, or 30 days from delivery for a full refund of premiums. Once the free look expires, if the insured drops their policy, it is cancelled and no refunds are given.
The insured and primary beneficiary dies in a terrible accident. It cannot be determined by the police who dies first. Under the Uniform Simultaneous Death Act, who dies first? A: The insured B: The Primary Beneficiary C: It doesn't matter no proceeds are paid D: The Contingent Beneficiary
B: The Primary Beneficiary In the Uniform Simultaneous Death Act, the primary beneficiary dies first in a common disaster.
In a 3-year-old policy that is being reinstated, the Incontestable clause pertains to statements made on which of the following documents? A: The application for the original policy B: The application for reinstatement C: The original policy's riders and endorsements D: The original policy's insuring agreement
B: The application for reinstatement The Incontestability clause will be based off the reinstated policy because reinstatement is contingent on current health of insured. Therefore if an insured committed fraud to reinstate, the insurer can protect themselves.
What is the tax consideration for taking a cash dividend option? A: The dividend is fully taxable as income B: The dividend is paid tax free C: Depending on income bracket of the insured, the dividend may be taxable D: If the company gets to keep half of the dividend it is take free
B: The dividend is paid tax free A dividend is a refund of excess premium and therefore is paid tax free. Taking a cash dividend will not change this tax rule because the policyholder is essentially getting back money they paid to the policy and the insurer did not need
The insured's primary beneficiary has died before them. When the insured dies all proceeds will go to: A: The insured's estate B: The insured's contingent beneficiary if named C: The insurer will retain all proceeds D: None of the Above
B: The insured's contingent beneficiary if named
The Waiver of Premium with Disability Income rider can be added at extra cost to a policy. What will determine how much disability income is paid with a qualifying loss? A: The amount of premium B: The total amount of death benefit C: A percentage of the Face Value D: A predetermined amount in the rider.
C: A percentage of the Face Value With a Waiver of Premium with Disability Income rider, the benefit amount depends on the percentage of the face value of the policy.
Initial Consideration from a policy owner consists of signing the application and which of the following according to the consideration clause in a life insurance contract? A: Delivery of the contract to the policy owner B: Naming a beneficiary C: Paying the initial premium D: Authorizing an investigation into the medical history of the proposed insured
C: Paying the initial premium The completed application and the initial premium payment constitutes initial consideration.
S has a policy that excludes suicide within the first two years of policy issuance. Sadly after 1 year of issuance, S takes his own life. The insurer will pay: A: Full Death Benefit B: Nothing C: Premiums back D: Premiums back plus interest
C: Premiums back If an insured commits suicide while the policy excludes the actions, premiums are refunded without interest.
Of the War exclusions under a life policy, which is the most restrictive? A: Aviation B: Results C: Status D: Hazardous Hobbies
C: Status The Status clause excludes all type of death while on activity duty in the military and is more restrictive than Results clause which only excludes war related death
Which of the following statements applies when an insured dies during the Grace Period of a life insurance contract? A: The policy's guaranteed cash surrender value less unpaid premiums is paid to the beneficiary. B: If the beneficiary pays unpaid premiums, he/she will receive the proceeds. C: The face amount of the policy less unpaid premium is paid to the beneficiary. D: The death benefit is forfeited.
C: The face amount of the policy less unpaid premium is paid to the beneficiary. If an insured dies during the grace period, the death benefit is paid minus any unpaid premiums at the time of death.
When K applied for a policy, he misstated his age. A few years after the policy has been issued, K is still alive and the company has found the misrepresentation. Which of the following is most likely to occur? A: The insurer will cancel the policy and refund all premiums. B: The death benefit will be adjusted. C: The insurer has the option what action to take. D: The premiums are adjusted
C: The insurer has the option what action to take. Since K is still alive, the insurer has the option of how to adjust the contract.
J has a life policy with the Guaranteed Insurability rider. J has just celebrated their 42nd birthday and realizes that she wants to use her rider and buy more death benefit. Which of the following will apply to J's request? A: The insurer will allow J to add more insurance without proving insurability. B: The insurer will allow J to add more insurance pending a paramedical exam. C: The insurer will deny J's request to add more insurance. D: The insurer will allow J to add more coverage pending proof of insurability and extra premium.
C: The insurer will deny J's request to add more insurance. The ability for the insured to buy more coverage because of the Guaranteed Insurability rider usually ends at age 40. Being that J 42, they will not be allowed to purchase more coverage because the rider has expired
Which of the following regarding ownership rights to the policy is CORRECT? A: The owner has a say in underwriting the policy B: The owner is the sole party that can make changes to a policy if they have an irrevocable beneficiary C: The owner can change ownership to another person without insurable interest required D: The owner can only change ownership of a policy to another person that has insurable interest
C: The owner can change ownership to another person without insurable interest required The policy owner can assign a policy to anyone, regardless of insurable interest
All of the following are fixed premium policies EXCEPT: A: Whole Life B: Variable Whole Life C: Universal Life D: Interest Sensitive Whole Life
C: Universal Life Universal Life policies have flexible premiums, whereas the listed whole life policy have fixed premiums.
Which of the following is not true about Assignment? A: Assignment is the legal transfer of ownership of a life policy from one party to another. B: Insurable Interest is not required to assign a policy. C: When assignment takes place, the policy death benefit and insured will be changed. D: Assignment can be absolute and permanent or used for collateral for a loan
C: When assignment takes place, the policy death benefit and insured will be changed. If assignment occurs, it does not change the policy or insured, it simply changes the policy owner.
The Insuring Clause contains all of the following EXCEPT: A: Name of the Policyholder B: Name of the Insured C: Beneficiary(s) D: Mode of Premium
D: Mode of Premium The mode of premium is not part of the Insuring Agreement that lists the parties of the contract.
Which of the following dividend options can a policy holder select to completely pay their policy off before endowment? A: Acceleration of Endowment B: Reduce Premiums C: Accumulation at Interest D: Paid-Up Option
D: Paid-Up Option Paid-Up Option is a dividend option that will allow the policyholder to pay off the policy by accumulating dividends at interest plus use the cash value when equal to the net single premium prior to endowment.
J has just purchased a whole life policy on her 5 year old daughter to protect her insurability and to start building cash value while she is young. Unfortunately, J has become permanently disabled but the policy's premiums are waived until her daughter attains age 21. Which rider would allow this to happen? A: Waiver of Premium with Disability Income Rider B: Guaranteed Insurability Rider C: Waiver of Premium D: Payor Benefit Rider
D: Payor Benefit Rider The Payor Benefit Rider waives all premiums on a policy where a minor child is the insured and the parent/guardian payor becomes disabled or dies.