Dividends

An insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use?

Paid-Up Option

One source of funds from which life insurance policy dividends are paid is Operating Expenses. This is when

The cost of operating the company is less than assumed

One source of funds from which life insurance policy dividends are paid is Investment Experience. This is when

invested premiums earn a higher return than was assumed

Which of the following is a necessary condition for reinstatement of a lapsed policy?

the insured must provide proper evidence of his or her insurability

Which settlement option provides a single beneficiary with income for the rest of his/her life

single life

When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?

It is reduced to the amount of what the cash value would buy as a single premium

Which of the following is NOT a factor in determining if dividends are paid to a policyowner?

Outstanding Policy Loans

Which of the following best describes fixed-period settlement option?

both the principal and interest will be liquidated over a selected period of time

what happens when a policy is surrendered for its cash value?

coverage ends and the policy cannot be reinstated

Which nonforfeiture option has the highest amount of insurance protection?

extended term

If you do not pay your premium on time, what will protect your insurance policy from an immediate lapse?

grace period

An insurance company's cost of doing business is lower than the amount that it has collected in premiums. Which of the following is true?

it will return a portion of the premiums to the policyowners

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

joint and survivor

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

An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe?

reduction of premium

The interest earned on policy dividends is

taxable

The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT

the insured age at death

The paid-up addition option uses the dividend

To purchase a smaller amount of the same type of insurance as the original policy.

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT

The interest is not taxable since it remains inside the insurance policy

One source of funds from which life insurance policy dividends are paid is Mortality. This is when

Fewer insureds die than were actually projected therefore fewer death claims were paid

What is TRUE about the cash surrender nonforfeiture option?

Funds exceeding the premium paid are taxable as ordinary income

An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe?

Reduction of Premium

An insured receives an annual life insurance dividend check. What term best describes this arrangement?

cash option

Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?

the beneficiary will only receive payments of the interest earned on the death benefit

An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called

Paid-up additions