Test Questions 2

An insured purchased a $20,000 Whole Life policy with Accidental Death and Dismemberment (AD&D). Three years later, the insured purposely took an overdose of sleeping pills which resulted in the insured's death. The insurance company will pay a MAXIMUM of

$20,000

J, a 30 year old proposed insured, plans to retire at age 60 and wants to purchase life insurance that offers level premiums and life-long protection. If J also wants the policy to be paid-up when J retires, J should buy

30-Pay Life

A life insurance company that shares its surplus earnings with its insureds is known as?

A Participating company

Which of the following items may be used to include coverage for children under their parent's insurance policy?

A Term rider

A Variable Whole Life policy offers which of the following features?

A fixed, level premium

The Payor clause of an insurance policy on a juvenile provides which of the following benefits?

A waiver of premiums if the payor becomes disabled

Which of the following provisions of a life insurance policy will pay a stated amount to an insured if the insured is blinded in an accident?

Accidental Death and Dismemberment clause

Which of the following provisions would keep a Whole Life policy in force if a required premium payment is not made and sufficient cash value exists from which the premium can be paid?

Automatic Policy Loan

An example of a Limited-Pay Life policy is

Life Paid-Up at Age 65

A policy that is overfunded, according to IRS tables, is classified as which of the following types of policies?

MEC

An insured must present evidence of insurability within a reasonable time after a policy has lapsed to exercise which of the following provisions

Reinstatement

Which of the following provisions can an insured use to put a policy in force that has lapsed as a result of nonpayment of premium?

Reinstatement

An insured lapsed a life insurance policy one year ago and now wants to reestablish this coverage. The policy can be placed in force under the

Reinstatement provision

Which of the following statements about the Suicide clause is CORRECT with regard to an Individual Life Policy?

Suicide may be excluded up to a year from date of issue of coverage while sane or insane

Credit policies MUST be issued in which of the following forms?

Term

Which of the following types of insurance policies would provide the greatest amount of protection for a temporary period?

Term

Which type of coverage when selected will allow an applicant to have excess life insurance coverage?

Term Rider

L purchased a life insurance contract on July 16, 2004. L became severely depressed and on November 1, 2004 took his own life. Which of the following statements best describes how the insurance company settled the claim with L's beneficiaries?

The claim was denied under the Suicide clause of the policy

Which of the following reflects the definition of a Modified Endowment Contract (MEC)?

The guideline level premium being the maximum level that can be paid into a policy and still have it qualify as a life insurance contract

Which of the following statements about the Waiver of Premium provision is INCORRECT?

The insured must receive Social Security disability benefits before the waiver claim becomes valid

Which of the following features is typical of Term insurance?

The policy expires at the end of the policy period

Which of the following statements is CORRECT about a Whole Life Policy?

The policyowner may borrow against the cash value of the policy

What is the purpose of insurance?

To replace the uncertainty of risk with guarantees

Which of the following policies is designed to provide flexible premiums and an adjustable death benefit?

Universal Life

An agent is required to register with the National Association of Securities Dealers (NASD) in order to sell which of the following policies?

Variable Life

A 40 year old insured who buys a Single Premium Whole Life Policy and lives to age 85 will have paid a total out-of-pocket cost that is

less than the premiums paid for a Straight Life policy

If an insured has an outstanding policy loan with interest due at the time of death, the insurer will recover the monies by deducting the amount from the

policy proceeds

The primary purpose of including a Suicide provision in a life insurance policy is to

protect the insurer against the purchase of a policy in contemplation of suicide

A policyowner decides to use dividends from a life insurance policy to purchase paid-up additions. The policyowner asks an agent to explain how the amount of the paid-up addition that is purchased each year will be determined. The agent's explanation includes all of the following facts EXCEPT

the age of the beneficiary

Under a group Credit Life policy, the amount of insurance on the life of a debtor is limited to

the total amount of the insured's loan

Under a Limited-Pay Life policy, the death benefit coverage usually continues

to age 100

An insured who exchanged a Term policy for a Whole Life policy without providing evidence of insurability probably exercised which of the following policy provisions?

Conversion privilege

Which of the following features of a group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability?

Conversion privilege

Which of the following policy sections enables a policyowner to exchange one insurance policy for a policy of a different kind?

Conversion privilege

Which of the following policies provides temporary coverage that may be changed to permanent coverage without regard to the insured's health?

Convertible Term

Which of the following factors in MOST important when an insured owner is trying to decide whether to convert term insurance at the insured's original age or the insured's attained age?

Cost of insurance

Which of the following sections of a life insurance contract states that the application is part of the contract

Entire Contract provision

The authority behind the requirements that an applicant for an Accident and Health policy MUST be notified of an investigation concerning the applicant's character, general reputation and mode of living is known as the

Fair Credit Reporting Act

All of the following are systems that support the sale of insurance through agents and brokers except.

Fraternal benefit society system

Which of the following statements about a five-year old Whole Life policy is CORRECT

If a policyowner stops paying premiums, the policyowner may elect a Nonforfeiture option

Which of the following statements about Equity Indexed Life Insurance is INCORRECT?

If the actual investment differs from what was expected, the premiums will be either lowered or raised

What type of agent may represent a number of insurance companies under separate contractual agreements

Independent agent

Which of the following clauses of an insurance contract states that a specified amount of money will be paid to a designated person on the death of an insured?

Insuring Agreement

Which life insurance arrangement is used to circumvent state insurable interest statutes

Investor-Originated Life Insurance

Which of the following statements about an Incontestable clause is CORRECT

It allows an insurer to contest a claim during the Contestable Period

Which of the following statements about an Incontestable clause is CORRECT

It allows an insurer to deny payment for homicide during the Contestable Period

28. Which of the following statements is CORRECT about a Variable insurance contract?

It does not guarantee a return on investment accounts

Which of the following statements is CORRECT about the Misstatement of Age provision?

It requires that an adjustment be made in the amount of insurance if the age of the insured is misstated

Which of the following statements is CORRECT about accelerated death benefits?

Only available to the terminally ill with a restricted life expectancy

Which of the following statements describes the income tax treatment of policyowner dividends

Only interest on accumulations is taxed

Dividends from a stock company are paid to stockholders,whereas in a mutual company dividends are?

Paid to the policyowners

The annual premium on an insured's life policy was due September 4. If he died on September 21 without paying the premium, the insurance company would take which of the following actions?

Pay the Death benefit less the past-due premium

An agent who sells a Juvenile Life policy should recommend which of the following provisions to ensure that premiums will be waived if the policyowner becomes disabled?

Payor clause

The governing body of a mutual insurance company is elected by the

Policyholders

Who is considered the owner of a mutual insurance company?

Policyholders

Which of the following statements is CORRECT about a Limited-Pay Life policy?

Premium payments are limited to a specified number of years

Which of the following statements is correct when comparing participating policies with non-participating policies?

Premiums for participating policies are usually higher than for non-participating policies

An applicant for life insurance must be informed of their rights under the Fair Credit Reporting Act at which of the following times?

When the producer completes the insured's application

N takes out a loan against a life insurance policy which is equal to one-half of the cash value. If N decides not to pay the interest when it is due, the insurance company will automatically

add to the loan balance the amount of interest due

The feature of a life insurance policy stating that the policy will not cover certain risks is called

an exclusion

If a life policyowner wants to take out a bank loan and the bank insists on collateral, the insured may

assign the policy to the bank

A Guaranteed Insurability rider allows an insured to purchase additional insurance

at specified future dates without submitting proof of insurability

All of the following rights are extended to a policyowner EXCEPT

changing a contract provision

Adjustable Life insurance is designed to meet an insured's need for

flexible premium

An Adjustable Life policyowner may take all of the following actions without providing proof of insurability EXCEPT

increase the face amount