Life Insurance Exam: Chapter 3

The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called

Joint and survivor

Which of the following settlement options in life insurance is known as straight life?

Life income

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to

Purchase a single premium policy for a reduced face amount

Which of the following will be stated in The consideration clause of a life insurance policy?

The amount of premium payment

An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement?

$200,000 (The beneficiary would most likely receive twice the amount of the face value of the policy, since his fatal injuries were caused by an accident and he died within the 90-day benefit limit that is stipulated in most policies.)

Under which of the following would an insurer pay accelerated benefits?

An insured is diagnosed with cancer and needs help paying for her medical treatment.

A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision?

Automatic premium loan

What would be an advantage to naming a contingent (or secondary) beneficiary in a life insurance policy?

It determines who receives policy benefits if the primary beneficiary is deceased.

The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the

One-year term option.

Who can request changes in premium payments, Face value, loans, and policy plans?

Policyowner

If an insured continually uses the automatic premium loan option to pay the policy premium,

The policy will terminate when the cash value is reduced to nothing

The rider in a whole life policy that allows the company to forgo collecting the premium If the insured is disabled is called

Waiver of premium

If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select?

fixed period

An absolute assignment is a

transfer of all ownership rights in a policy

A business owner was trying to obtain a bank loan to fund the purchase of a new business facility, but the bank required proof of additional assets to secure the loan. The business owner than decided to use her $250,000 life insurance policy to secure the loan. Which provision makes this possible?

Collateral assignment