life insurance policy provisions quiz

Which of the following statements is CORRECT? A)After a policy is delivered to and accepted by the policyowner, it cannot be changed in any way, except in accordance with terms stated in the contract. B)If an insuring company revises its bylaws or practices, any life insurance contract issued before the change must be modified to reflect the company's new policies. C)Misrepresentations made in an application are always considered grounds for voiding an insurance contract. D)If a premium deposit is not paid with the application, the policy will still be valid if the applicant is acceptable to the insurer's underwriters.

A)After a policy is delivered to and accepted by the policyowner, it cannot be changed in any way, except in accordance with terms stated in the contract.

Clarence, the insured, designated his estate as the beneficiary of his life insurance policy. Which of the following statements is CORRECT? A)The amount of Clarence's estate will be reduced by the amount of proceeds it receives. B)The proceeds will not be included in Clarence's gross estate for estate tax purposes. C)Clarence's creditors can make claims against the proceeds more readily than if the proceeds were paid to named beneficiaries. D)The heirs will be able to select specific settlement options from the estate, just as if they were the direct beneficiaries.

C)Clarence's creditors can make claims against the proceeds more readily than if the proceeds were paid to named beneficiaries.

The purpose of the incontestability provision is to protect A)the beneficiary B)he employer C)the insured D)the insurer

C)the insured

An assignment in which the assignee receives full control over the policy is called A)an absolute assignment B)a guaranteed assignment C)a revocable assignment D)a collateral assignment

A)an absolute assignment

Stella sends a written request to her insurer for a change to be made on her policy. What is that change called? A)an endorsement B)an assignment C)an application D)a contract

A)an endorsement

All of the following are life insurance policy provisions EXCEPT A)notice of claim B)modifications C)payment of claims D)assignment

A)notice of claim

Which of the following statements about life insurance is NOT correct? A)A policyowner must notify the insurer in writing to transfer a policy. B)A policyowner must notify the beneficiary before transferring ownership. C)If a policy is transferred, the new owner receives all of the rights of policy ownership. D)Life insurance is not a personal contract between the insurer and insured.

B)A policyowner must notify the beneficiary before transferring ownership.

What happens if, when paying benefits, the insurer discovers that a person's age had been misstated on his individual life insurance application? A)Benefits will be paid as if the incorrect age stated were actually the correct age. B)Benefits will be paid for the amount of coverage the premium would have purchased at the correct age. C)The policyholder's estate must pay a $10,000 fine. D)No benefits will be paid.

B)Benefits will be paid for the amount of coverage the premium would have purchased at the correct age.

Winston, the insured, and his spouse, Irene, his sole beneficiary, both died in a hotel fire. Hospital physicians witnessed that Irene lived at least 2 hours longer than Winston. The life policy had no common disaster clause. Which of the following will receive the policy proceeds? A)The state B)Irene's estate C)Winston's estate D)Winston's secondary beneficiary

B)Irene's estate

Which of the following is a required provision in all individual life insurance policies? A)Notice of claim B)Reinstatement C)Conversion D)Open enrollment

B)Reinstatement

The best reason for designating a trust as a life insurance policy beneficiary is to A)make it possible to accumulate income tax-free interest on the policy proceeds once they are paid into the trust B)make it possible to manage the policy proceeds for the long-term benefit of an individual or organization C)remove the policy proceeds from the insured's taxable estate D)make it possible to benefit an individual or organization that might have otherwise been ineligible to be a designated beneficiary

B)make it possible to manage the policy proceeds for the long-term benefit of an individual or organization

A lapsed life insurance policy may be reinstated if all of the following requirements are met EXCEPT A)the policy has not been surrendered B)waiting 7 years after the premium default date to reinstate C)no more than 3 years have passed since the date of premium default D)its cash value has not been exhausted

B)waiting 7 years after the premium default date to reinstate

A beneficiary receives the proceeds from a life insurance policy in a lump-sum payment. Which of the following statements best explains how the proceeds will be treated in relation to the debts of the beneficiary? A)It is protected from the beneficiary's creditors as long as it is paid in a lump sum. B)It is protected from the beneficiary's creditors once it is paid to a beneficiary. C)It can be subject to the beneficiary's debts and creditors. D)It is not subject to the beneficiary's debts and creditors.

C)It can be subject to the beneficiary's debts and creditors.

Ted, the insured in a $75,000 life policy, and his sole beneficiary, Maxine, are killed instantly when their car is struck by a train. Under the Uniform Simultaneous Death Act, to whose estate will the policy proceeds be payable? A)Maxine's estate B)The proceeds will escheat to the state C)Ted's estate D)Both Ted's and Maxine's estates, equally

C)Ted's estate

Micah pays $220 annually for a $50,000 life insurance policy. The premium is due June 1; however, it is not paid until June 24. If Micah died on June 15, what would the amount of the death benefit? A)$0 B)$49,220 C)$50,000 D)$49,780

D)$49,780

When the insured and the beneficiary in a life insurance policy die simultaneously, how must the proceeds of the policy be distributed? A)As if the insured had designated another beneficiary B)As if the beneficiary had survived the insured C)As if the insured had assigned the policy to the beneficiary D)As if the insured had survived the beneficiary

D)As if the insured had survived the beneficiary

Which provision sets forth the insurer's basic promise to pay benefits upon the insured's death? A)Reinstatement provision B)Consideration clause C)Settlement options provision D)Insuring clause

D)Insuring clause

Which of the following statements pertaining to the insuring clause in a life insurance policy is NOT correct? A)It gives the effective date of coverage. B)It names the beneficiary. C)It defines the responsibilities of the insurer. D)It specifies the length of the grace period.

D)It specifies the length of the grace period.

In which of the following cases would the insurance company most likely cover the loss under a life insurance policy? A)While competing in the local county fair's derby race, Sanjay and Craig are both killed in an explosion as their cars collide. B)Frank's ski mask impairs his vision while he is robbing a bank, causing him to trip; he hits his head on the floor and is killed instantly. C)While taking her final pilot's test, Sandi losses control of her plane and dies in the crash. D)Joe, a retired army general, dies of a heart attack at age 85.

D)Joe, a retired army general, dies of a heart attack at age 85.

Which of the following is stated in the consideration clause of a life insurance policy? A)The insured's general health condition B)The insured's risk classification C)Benefits payable upon the insured's death D)The amount and frequency of premium payments

D)The amount and frequency of premium payments

Tina's grandparents purchased a $250,000 universal life insurance with the intent to permanently transfer ownership to her when she turned 21. What is that transfer of rights known as? A)ownership rights B)a collateral assignment C)absolute change of beneficiary D)an absolute assignment

D)an absolute assignment

The purpose of the common disaster provision is to A)provide benefits to the primary beneficiary's heirs B)protect the interests of the primary beneficiary C)provide benefits in case of a common disaster, such as a flood D)protect the interests of the contingent beneficiary

D)protect the interests of the contingent beneficiary