XCEL Chapter 3 Life Insurance Part 2 Exam
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 death benefit
K pays on a $20,000 20-year endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 death benefit
S buys a $50,000 whole life policy with a $50,000 Accidental Death and Dismemberment rider. S dies 1 year later of natural causes. How much will the insurer pay the beneficiary?
$50,000
P purchases a $50,000 whole life insurance policy in 2005. One of the questions on the application asks if P engages in scuba diving, to which P answers "No". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insurer pay to P's beneficiary?
$50,000 minus any outstanding policy loans.
T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?
$50,000, which is the Face Amount
What are some characteristics of Guaranteed Insurability Option rider?
-Coverage can be added at a specific events such as marriage or having a child -Evidence of insurability is not required when the option is exercised -Coverage can be added at specific ages
What are the characteristics of Settlement Options?
-Increased proceeds can be provided through accumulation of interest -Rapid depletions of proceeds can be avoided -Proceeds can be administered by the insurance company
What are the characteristics of the Grace Period?
-Policy loans may still be made -Full coverage continues -Grace period terms are stated in the policy
An insurer may normally delay the payment of a cash value loan or surrender value for up to how many months?
6 months or half a year
The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n)
Accidental Death and Dismemberment (AD&D)
P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount?
Accidental Death and Dismemberment clause
Which of the following dividend options results in taxable income to the policyowner? -Paid-up Additions -Cash -Accumulation at Interest -Reduced Premium
Accumulation at Interest
What does the insuring agreement in a Life insurance contract establish?
An insurer's basic promise
What action can a policyowner take if an application for a bank loan requires collateral?
Assign policy ownership to the bank
What action can policyowner take if an application for a bank loan requires collateral?
Assign policy ownership to the bank
What action will an insurer take if an interest payment on a policy loan is not made on time?
Automatically add the amount of interest due to the loan balance
What life insurance policy features make a policy loan possible?
Cash Value
A policy loan is made possible by which of these life insurance policy features?
Cash Value provision
What life insurance policy provision states that collateral for a bank loan?
Collateral Assignment
Which of these actions is taken when a policyowner uses a life insurance policy as collateral for a bank loan?
Collateral Assignment
The incontestable clause allows an insurer to do what?
Contest a claim during the contestable period
What happens in a misstatement of age provision?
Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered.
What policy does not have the automatic premium loan provision attached to it?
Decreasing Term
Which of these statements about a Guaranteed insurability option rider is not true?
Evidence of insurability is required when the option is exercised
In a life insurance policy, which feature states that the policy will not cover certain risks?
Exclusion
N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot?
Exclusion
When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n)
Exclusions
D owns a Whole Life policy that was purchased 10 years ago. If the premium payments suddenly stop and D takes no additional action, which Nonforfeiture Option will the insurer likely proceed with?
Extended Term
What nonforfeiture option offers the highest death benefit??
Extended-Term
An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?
Full face amount minus any past due premiums
A nonforfeiture clause gives the policyowner
Guaranteed values even if the policy has lapsed
What does a nonforfeiture clause gives the policyowner?
Guaranteed values even if the policy has lapsed
When would life insurance policy pay additional benefits to an insured under Accidental Death and Dismemberment (AD&D) provision?
If insured is blinded in an accident
A long term care rider in a life insurance policy pays a daily benefit in the event of which of the following?
Inability of the insured to perform more than 2 Activities of Daily Living (ADL's)
A long-term care rider in a life insurance policy pays a daily benefit in the event of what?
Inability of the insured to perform more than 2 activities of daily living (ADL's)
All of these statements about the Waiver of Premium provision are correct EXCEPT
Insured must be eligible for Social Security disability for claim to be accepted
The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called an
Insuring Agreement
In a life insurance contract, an insurance company's promise to pay stated benefits is called the:
Insuring clause
Which of these is NOT considered to be a right given to a policyowner? -Surrendering the policy's cash value -Modify a provision in the insurance contract -Assignment of ownership -Change the beneficiary, if revocable
Modify a provision in the insurance contract
How do you qualify for accelerated death benefits?
Must have a terminal illness to qualify
Which of the following statements is correct about accelerated death benefits?
Must have a terminal illness to qualify
All of these statements concerning settlement options are true, except
Only the beneficiary can select
Which statement is true in regards to a policy loan
Past-due interest on a policy loan is added to the total debt
Which statement is TRUE in regards to a policy loan? -Past due interest payments not paid after 3 months will void the policy -Past due interest on a policy loan is added to the total debt -Insurance companies can send delinquent interest accounts to a collection agency -Insurance companies can charge an interest rate based on the policyowner's credit report
Past-due interest on a policy loan is added to the total debt.
M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?
Pay face amount minus the past due premium
What do you call A Provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value?
Policy Loan Provision
M has an insurance policy that also has an outstanding policy loan at the time of M's death. The insurer will deduct the outstanding loan balance from the: -Cash Value -Estate of the insured -Policy Proceeds -Nonforfeiture Value
Policy Proceeds
Who has the right to change a life insurance policy's beneficiary?
Policyowner
Which of these Nonforfeiture Options continue a build-up of cash value?
Reduced paid up
The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called
Reinstatement
Which of these provisions require proof of insurability after a policy has lapsed? -Insuring -Conversion -Reinstatement -Consideration
Reinstatement
J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions?
Reinstatement Provision
Which of these life insurance riders allows the applicant to have excess coverage? -Automatic Premium Loan rider -Waiver of Premium rider -Guarantee Insurability rider -Term rider
Term Rider
The consideration clause in a life insurance policy indicates that a policyowner's consideration consists of a completed application and what?
The initial premium
The advantage of reinstating an original life policy is
The premiums are based on a younger age
What is the advantage of reinstating an original life policy?
The premiums are based on a younger age.
Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
Variable Life
Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options? -Modified Whole Life - Variable Life - Universal Life - Adjustable Life
Variable Life
A life insurance policyowner would like to take out a policy loan against the cash value in his whole life policy. The interest rate applied to this loan may vary over time. This is referred to as an ____ rate loan
Variable Rate Loan
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
Variable Universal Life
A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?
Waiver of Premium
What does the ownership clause in a life insurance policy state?
Who the policyowner is and what rights the policyowner is entitled to
A return of premium life insurance policy is
Whole life and Increasing term
What is a return of premium life insurance policy?
Whole life and increasing term
The automatic premium loan provision is designed to:
avoid a policy lapse
Variable Whole Life Insurance can be described as
both an insurance and securities product
The incontestable clause allows an insurer to
contest a claim during the contestable period
Dividends paid from a life insurance policy are
issued by insurer
In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy?
Owner's Rights
P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?
P will still receive declared dividends
A young, married teacher has two children and owns a Whole Life policy. If the teacher wants an increasing Death Benefit to protect against inflation, the teacher should select which of the following Dividend Options?
Paid-Up Additional Insurance
All of the following statements are true regarding a policy's Grace period, EXCEPT: -Past due premiums are waived -Policy loans may still be made -Full coverage continues -Grace period terms are stated in the policy
Past due premiums are waived
M had annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?
Pay face amount minus the past due premium
Which life insurance rider typically appears on a Juvenile life insurance policy?
Payor Benefit Rider
What provision guarantees that premiums will be waived if a Juvenile Life policyowner becomes disabled?
Payor Clause
What benefit does the Payor clause on a Juvenile Life policy provide?
Premiums are waived if the payor becomes disabled
What Nonforfeiture Options continue a build-up of cash value?
Reduced Paid-Up
S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy?
Return of premium rider
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20-Pay Life accumulates cash value faster than Straight Life
What does the cost of living rider gives to the insured?
Additional Death Benefits
What does a term life rider offers the insured?
Additional Life Coverage
The advantage of reinstating an or
Additional Whole Life coverage at specified times
A cost of living rider gives the insured
Additional death benefits
L takes out a life insurance policy and dies 10 years later. During the claim process, the insurer discovers that L had understated her age on the application. Under the Misstatement of Age provision, the insurer will
Adjust the death benefit to a reduced amount.
The Consideration clause in a life insurance contract contains what pertinent information?
Amount of premium payments and when they are due.
When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?
At future dates specified in the contract with no evidence of insurability required.
S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?
Automatic Policy Loan
S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT -Type of life insurance -S's attained age -Dividend amount used toward purchase -Beneficiary age
Beneficiary Age
P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?
Beneficiary will be paid the Death Benefit
Whose life is covered on a life insurance policy that contains a payor benefit clause?
Child
Which rider provides coverage for a child under a parent's life insurance policy?
Child Term Rider
N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?
Claim will be denied
How do life insurance companies handle cases where the insured commits suicide within the contract's stated Contestable period?
Claims are denied under the Suicide clause of the policy
All of these statements concerning Settlement Options are true, EXCEPT: -Increased proceeds can be provided through accumulation of interest -Rapid depletions of proceeds can be avoided -Proceeds can be administered by the insurance company -Only the beneficiary may select
Only the beneficiary may select
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
Decreasing Term
Additional coverage can be added to a Whole Life policy by adding a(n)
Decreasing term rider
How are surrender charges deducted in a life policy with a rear-end loaded provision?
Deducted when the policy is discontinued.
What provision in a life insurance policy states that the application is considered part of the contract?
Entire Contract Provision
Which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself?
Entire Contract Provision
Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE? -Evidence of Insurability is required when the option is exercised -Coverage can be added at a specific events such as marriage or having a child -Evidence of insurability is not required when the option is exercised -Coverage can be added at specific ages
Evidence of Insurability is required when the option is exercised.
D is the policyowner and insured for a $50,000 life insurance policy. The beneficiary is D's wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid to?
Ex-wife
All of these statements about the Waiver of Premium provision are correct EXCEPT: -A waiting period must pass before becoming eligible for benefits -Waiver of Premium is available on both permanent and term insurance policies -Insured must be eligible for Social Security disability for claim to be accepted -Insured must be totally disabled to qualify
Insured must be eligible for Social Security disability for claim to be accepted.
The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called a(n)
Insuring Agreement
In a Life insurance contract, an insurance company's promise to pay stated benefits is called the what?
Insuring Clause
All of these Settlements options involve the systematic liquidation of the death proceeds in the event of the insured's death, EXCEPT: -Fixed Period -Interest Only -Fixed Amount -Life Income
Interest Only
How are policyowner dividends treated in regards to income tax?
Interest on accumulations is taxed
Dividends paid from a life insurance policy are issued by who?
Issued by the insurer
Which of the following statements about accumulated interest earned on dividends from an insurance policy is true?
It is taxed as ordinary income
Which of these is not an Example of Nonforfeiture Option? -Extended Term -Reduced Paid-Up - Cash Surrender - Life Income
Life Income
The Accelerated Death Benefit provision in a life insurance policy is also known as an:
Living Benefits
An insured's inability to perform two or more activities of daily living may trigger which type of policy rider?
Long Term Care
D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive?
The full face amount
When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?
Void the policy only if it is discovered during the Contestable period and proven to be material.
When is the face amount of a Whole Life policy paid?
When the insured dies or a t the policy's maturity date, whichever happens first
What is the Suicide provision designed to do?
safeguard the insurer from an applicant who is contemplating suicide
