chapter 14
Jenna has a Life Insurance policy with a death benefit of $200,000 and a cash value of $50,000. She takes a maximum policy loan and dies EXACTLY one year later. How much will be paid to her beneficiary?
$150,000
Which of the following provides the beneficiary with periodic income payments for the life of the beneficiary?
.Annuity Settlement Option
Which of the following dividend options would result in an increase in taxable income for the policy owner?
Accumulate at Interest
Which of the following is the automatic dividend option?
Additional Paid-Up Insurance
Each of the following is a dividend option EXCEPT?
Annuity
Sharon has a Life policy and has selected a settlement option that will pay an income to her husband for his life. Which settlement option did she choose?
Annuity Settlement Option
Each of the following is a dividend option EXCEPT?
Automatic Policy Loan
Which of the following does not involve the systematic liquidation of death benefit proceeds?
Cash Settlement Option
Kent selects the Paid-Up Additions Dividend Option for his participating Whole Life policy. Which of the following is true?
Each dividend purchases more Whole Life Insurance on a single net premium basis.
Kobi purchased a Whole Life policy at age 23. At age 45, she is tired of paying the premium each month. If she discontinues the payments, which nonforfeiture option will automatically be used?
Extended Term Insurance
Which nonforfeiture option provides the greatest level of death benefit if exercised?
Extended Term Insurance
Phil purchased a Whole Life policy. The first year he paid $400 in premium, the second year he paid $320 in premium, the third year he paid $338 in premium. What is the most likely explanation for his fluctuating payments?
He selected the Reduced Premium Dividend Option.
Which of the following actions would be permitted by the policy owner without the consent of the irrevocable beneficiary?
Increase the death benefit.
An Insured wants monthly earning from the death benefit to be paid to a charity for 10 years and then the balance equally divided among his surviving family members. The appropriate settlement option is:
Interest Only
Which of the following statements IS true?
Mutual companies are known as participating companies.
Which increases the policy's flexibility in the event the Insured is no longer able to pay the premiums?
Nonforfeiture Option
Policy loans can only be made for policies that have which of the following options?
Nonforfeiture Options
Which of the following deals with the policy owner's equity in a policy?
Nonforfeiture Options
Under which of the following circumstances is a person most likely to be eligible for reinstatement?
Stan surrendered his Whole Life policy one year ago and opted for the Reduced Paid-Up Insurance Nonforfeiture Option.
Each of the following statements regarding the Accumulate at Interest Dividend Option is true EXCEPT?
The dividends and any interest earned will not be taxed
What are the tax consequences of dividends paid by mutual companies?
The dividends are not taxable.
Which portion of the Accumulate at Interest dividend payments would be subject to taxation?
The interest in the year it was earned.
which are the nonforfeiture options?
extended term, reduced paid up insurance, and cash
A Life policy will NOT be reinstated if it was terminated due to:
fraud
A policy owner who has taken a loan must pay back what portion of the loan prior to death?
none
Which of the following dividend options increases the death benefit at the lowest cost?
paid up additions
Which of the following is NOT a nonforfeiture option?
paid up additions
Which is the only one of the three Nonforfeiture Options that will result in a cash value account that will continue to grow?
reduced paid-up
Who selects the settlement option?
The policy owner.
Under which of the following circumstances may a policy be reinstated?
The policy was a Whole Life policy and the Extended Term Insurance Nonforfeiture Option was used.
Which of the following dividend options would be of importance to an Insured's tax accountant?
accumulate at interest
Which of the following is NOT a nonforfeiture option?
automatic premium loan
Which policy provision is designed to shield a policyowner from the irrevocable loss of cash value due to nonpayment of premium?
Nonforfeiture Provision
With regard to taxation and policy dividends, which of the following statements is true?
Only the accumulated interest portion of the dividends will be taxed.
Which of the following dividend options purchases fully paid whole life insurance on a net single premium basis?
Paid Up Additions Option
Each of the following is true of policy dividends EXCEPT?
Policy dividends are a distribution of profits.
An Insured wishing to reinstate a policy may be required to furnish all of the following EXCEPT:
Prepayment of the next premium.
Which statement best describes the settlement options feature in a policy?
The various choices the policy owner has in deciding how the death benefit will be distributed to the beneficiary.
Each is true about paid up additions EXCEPT?
They are not the automatic (default) dividend option selection.
