Quiz: Regulation of Life Insurance Policies

Who of the following will not qualify for an acceleration of death benefits under her life insurance policy? A. Pam, who must undergo a liver transplant B. Paula, whose brain cancer is expected to take her life within a year C. Peggy, who is moderately overweight and has no one to help her get around D. Patsy, who requires continuous institutional care for the remainder of her life

A life insurance policy or rider may provide for the acceleration of death benefits upon a qualifying event. Being moderately overweight is not a qualifying event.

Which of the following is a correct statement about an acceleration of benefits payout? A. Payout may not be made in a lump sum. B. The insurer will determine the payout. C. The payout must be in a lump sum. D. A lump sum must be a payout option.

D. A lump sum must be a payout option. An insurer must include a lump sum as a payment option for the accelerated benefit.

Margo has been hospitalized for three weeks. When she returns home, she discovers that her son, who was in charge of paying her bills, did not pay her life insurance policy premium. What remedies are available to her? A. The contract may be reinstated with the payment of past due premiums. B. No remedy is necessary because she is still in her contract's grace period. C. The contract may be resumed with the next payment. D. No remedies are available because the contract is forfeit.

For all payments after the first, life insurance policies must have a grace period of 30 days or, at the option of the insurer, one month, but not less than 30 days.

Mark has been covered by his employer's group policy for nine years. He dies suddenly. The insurer discovers that he stated his age in the application as 51 years when he was actually 61 years old. How will the policy respond? A. Proceeds will be based on what the premium would have purchased at the correct age. B. Proceeds will be based on representations in the application because the incontestability period has passed. C. Proceeds will be adjusted by a penalty for the misstatement. D. No benefits will be paid because of Mark's attempt at fraud.

A. Proceeds will be based on what the premium would have purchased at the correct age. If the age or sex of the person upon whose life the policy is made has been misstated and the premium was based on this misstatement, the benefits will be adjusted to reflect what the premium would have purchased for the correct age or sex.

When she applied for life insurance, Loreen forgot to mention in the family medical history section that both of her parents had been successfully treated for cancer. As her husband is gathering documents to apply for the death benefit four years later, he sees the omission on his copy of the application and volunteers it to the insurer. How will the policy respond? A. The policy will pay the claim. B. The policy will be rendered void. C. The proceeds will not be paid because of fraud on Loreen's part. D. The policy will pay the claim after making an underwriting adjustment.

A. The policy will pay the claim. After a policy has been in force for two years, it becomes incontestable with respect to the truthfulness of any statements that the insured made in the insurance application. The policy may be canceled only for nonpayment of premium.

Which of the following is not a qualifying event for an accelerated benefit under a life insurance policy? A. a double knee replacement B. a heart transplant C. a stroke victim who requires institutionalization for life D. a diagnosis with cancer and less than one year to live

A. a double knee replacement A double knee replacement does not meet the strict criteria of a qualifying event for the payment of accelerated death benefits.

Which of the following is a correct statement about an acceleration of benefits payout? A. A lump sum must be a payout option. B. Payout may not be made in a lump sum. C. The payout must be in a lump sum. D. The insurer will determine the payout.

An insurer must include a lump sum as a payment option for the accelerated benefit.

Which of the following statements about the assignability of life and disability policies in Oregon is correct? A. They are not assignable. B. Assignability depends on the terms of the contract. C. Individual policies are assignable, but group policies are not. D. They are assignable.

B. Assignability depends on the terms of the contract. A policy may be assignable or not assignable, depending on the terms of the contract.

When she applied for life insurance, Loreen forgot to mention in the family medical history section that both of her parents had been successfully treated for cancer. As her husband is gathering documents to apply for the death benefit four years later, he sees the omission on his copy of the application and volunteers it to the insurer. How will the policy respond? A. The proceeds will not be paid because of fraud on Loreen's part. B. The policy will be rendered void. C. The policy will pay the claim. D. The policy will pay the claim after making an underwriting adjustment.

C. The policy will pay the claim. After a policy has been in force for two years, it becomes incontestable with respect to the truthfulness of any statements that the insured made in the insurance application. The policy may be canceled only for nonpayment of premium.

Marge replaces her life insurance policy with another policy after talking with her agent. The next day when her son learns of the purchase, he insists that she cancel it because she cannot afford the higher premiums. Which of the following will be Marge's best course of action? A. file suit against her agent to have the policy rescinded B. plead with her agent to tear up the policy C. cancel the policy because she is still in the free-look period D. file suit against the insurer because the agent should have known she could not afford the premiums

C. cancel the policy because she is still in the free-look period Individual life insurance policies contain a ten-day free-look period. However, a 30-day period is required when an existing policy is being replaced. Applicants and insureds are entitled to a full refund of premium if they return the policy within the free-look period, which begins when the policy or contract is actually received.

What is the maximum interest rate that may be charged on a loan against a life insurance policy? A. 3 percent B. 6 percent C. 2 percent D. 8 percent

D. 8 percent The maximum interest rate on a policy loan is 8 percent per year. The insurer may include in the policy loan provision, in lieu of a fixed maximum interest rate, a provision for an adjustable interest rate.

Individual life insurance policies in Oregon must contain a free-look period of how many days? A. 10 B. 14 C. 31 D. 15

Individual life insurance policies contain a 10-day free-look period. However, a 30-day period is required when an existing policy is being replaced.