AD Banker Chapter 4 Exam Questions

Albert, as the owner of a life insurance policy insuring his son David, wants a Settlement Option that, if David were to die, would provide guaranteed payments to Albert and his wife Lois, until both of them die. Albert should choose: a. Joint Life b. Life Income Period Certain c. Life Income Joint Survivor d. Fixed Amount

c. Life Income Joint and Survivor

Cranston wants a Settlement Option for his beneficiary that will guarantee the beneficiary an income as long as the beneficiary lives. Cranston should choose: a. Fixed Period b. Fixed Amount c. Life Income Only d. Interest

c. Life Income Only

Beth owns a 20-Pay Life participating policy. She has decided that the dividends should be applied toward future premiums. Which Dividend Option did she choose? a. Cash b. Paid-Up Option c. Premium Reduction d. Accumulate at Interest

c. Premium Reduction

Individual life policies typically pay out a death benefit if death is a result of suicide after they have been in force for ______ years. a. 5 b. 6 c. 4 d. 2

d. 2

Generally, an insurer may defer the granting of a policy loan for up to __________ months. a. 9 b. 12 c. 3 d. 6

d. 6

What are the two types of life insurance assignments? a. Complete and partial b. Entire amount and percentage amount c. Revocable and irrevocable d. Absolute and collateral

d. Absolute and collateral

All of the following are nonforfeiture values, except: a. Automatic premium loan b. Cash surrender c. Extended term d. Reduced paid-up

a. Automatic Premium Loan

Which provision allows an insurer to borrow from the cash value of a policy in order to pay premiums due and prevent a lapse in coverage? a. Automatic Premium Loan b. Partial Withdrawal c. Spendthrift d. Reinstatment

a. Automatic Premium Loan

Which Settlement Option pays a specified dollar amount until benefits are exhausted? a. Fixed Amount b. Paid-Up Option c. Life Income d. Life Income with Period Certain

a. Fixed Amount

A life insurance policy lists the names of 3 people as primary beneficiaries. Other than listing the person's names, which of the following is the most important next step? a. Indicate what percentage of the death benefit each is entitled to receive b. Include the beneficiary's middle name or initial c. Specify the occupation of each beneficiary d. Make certain the names are listed in alphabetical order

a. Indicate what percentage of the death benefit each is entitled to receive

Albert owned a $100,000 policy that had accumulated a cash value of $20,000, against which he had borrowed $10,000. If he dies with this loan outstanding, his beneficiary will receive which of the following amounts? a. $120,000 b. $90,000 c. $80,000 d. $110,000

b. $90,000

Sylvia was the insured and owner of a policy that named her husband as the beneficiary. Upon her husband's death, she decided to change the beneficiary designation to her best friend since she has no close living relatives. The insurance company will: a. Require Sylvia to prove that her best friend is financially dependent on her b. Accept the beneficiary change c. Decline the change due to lack of insurable interest d. Require Sylvia to prove insurability

b. Accept the beneficiary change

A _____________ Option protects the policyowner against total loss of benefits in the event of a lapsed policy. a. Spendthrift b. Nonforfeiture c. Dividend d. Settlement

b. Nonforfeiture

Ted owns a $50,000 Whole Life Policy. At age 47, he decides to stop paying premiums on his policy when it was $15,000 of cash value and exercise the Extended Term Option. Ted's term benefit will be: a. $65,000 b. $50,000 c. $15,000 d. $35,000

b. $50,000

Which Settlement Option pays for a specified period, regardless of who may receive the payments? a. Life Income with Period Certain b. Fixed period c. Fixed amount d. Paid-up Additions

b. Fixed period

All of the following are TRUE about the Automatic Premium Loan (APL) Provision, except: a. It is available on any type of life insurance policy. b. It can be cancelled at any time by the policyowner c. It becomes effective, if elected, at the end of the grace period d. It must be elected by the policyowner

a. It is available on any type of life insurance policy

Fred owns a 40-Pay Life Policy. He designated was wife, Ethel, as primary beneficiary. Upon Fred's death, Ethel receives a set amount for life. Fred chose which Settlement Option? a. Life Income Only b. Fixed Period c. Extended Term d. Joint Life

a. Life Income Only

Burt named Liz as his beneficiary; however, he did not choose Settlement Option. At the time of his death, who determines the option to be used to receive the benefit? a. Liz the beneficiary determines which option she would like to have b. Burt's estate, since no Settlement Option was chosen c. Lump sum is the automatic option when no option was preselected prior to death of the insured d. The insurer decided when the election is not made by the policyowner prior to death

a. Liz the beneficiary determines which option she would like to have

Frank has a life insurance policy in which he chooses to have the dividends increase the death benefit. Which Dividend Option did he select? a. Paid-Up Addition b. Fixed Amount c. Acceleration of Endowment d. Paid-Up Option

a. Paid-Up Addition

All of the following are Settlement Options, except: a. Reduced Paid-Up b. Fixed Period c. Fixed Amount d. Life Income Joint and Survivor

a. Reduced Paid-Up

Beth exercised an owner's option on a life policy to stop paying premiums but continue to be covered until she was age 100. Which nonforfeiture Option did she choose? a. Reduced Paid-Up b. Paid-Up Option c. Extended Term d. Paid-Up Additions

a. Reduced Paid-Up

If the premiums are not paid on a Traditional Whole Life policy that has been in force for decades with no loan outstanding, what happens? a. Unless specified otherwise, the cash values buy extended term b. The policy becomes a reduced paid-up policy c. The insurer mails a check to the policyowner in the amount of the policy's cash value d. The policy lapses and if of no value to the policyowner

a. Unless specified otherwise, the cash values buy extended term

All of the following are Dividend Options, except: a. Cash b. Reduced paid-up c. One-year term d. Paid-up additions

b. Reduced paid-up

The interest earned on a dividends is: a. Tax-deductible b. Taxable c. Nontaxable d. Tax-deferred

b. Taxable

When does a change in beneficiary take effect? a. The date the policyowner receives the change of beneficiary form from the insurer b. The date the policyowner signs the request to change the beneficiary c. The date the home office of the insurer receives the request for change beneficiary change d. The date the change of beneficiary form is mailed by the policyowner to the insurer

b. The date the policyowner signs the request to change the beneficiary

Mona let her permanent policy lapse. She discovered there was a $2,498 in cash value remaining in the policy and decided to pay off some of her credit card debt. She exercised which Nonforfeiture Option? a. Fixed Amount b. Reduced Paid-Up c. Cash Surrender d. Extended Term

c. Cash Surrender

Which of the following is FALSE regarding Settlement Options? a. If the policyowner has chosen an option prior to death, the beneficiary cannot change it at time of claim b. A policyowner may change a previously chosen settlement option before the insured dies c. Settlement Options are used when the insured wants to convert a policy's cash values into a living benefit d. Both principal and interest received as a result of a settlement option are taxed as ordinary income to the beneficiary, as received

d. Both principal and interest received as a result of a settlement option are taxed as ordinary income to the beneficiary, as received

A beneficiary receives ample income each month from the interest earned while the insurance company retains the principal. This is referred to as which of the following? a. Capital Gains b. Net Capital c. Capital Earnings d. Capital Conservation

d. Capital Conservation

All of the following are situations in which a life insurance company can legally get out of paying a death claim after the insured has died, except: a. Within 6 months after the policy issue date, the insurer discovers material misrepresentations made on the application which, had they been known, the policy would not have been issued b. The insured died by suicide 9 months after the policy was issued c. The insured dies when he crashes his plane into the ground 2 hours after receiving his pilot's license d. Five years after the policy was issued, the insurer discovered that the insured was actually older than was stated on the application

d. Five years after the policy was issued, the insurer discovered that the insured was actually older than was stated on the application

Frank, the owner of a life insurance policy, chooses a Settlement Option whereby the proceeds of policy will be paid out over 20 years. Frank has chosen: a. Life Income Period Certain b. Fixed Amount c. Life Income Joint and Survivor d. Fixed Period

d. Fixed Period

Angela bought a policy from her friend, an insurance producer. After looking it over thoroughly, Angela only has one question. Will she receive dividends? She will if the policy is which of the following? a. Nonparticipating b. Cash Value Policy c. Accumulating d. Participating

d. Participating

Which statement is FALSE regarding Nonforfeiture Options? a. The add flexibility to a cash value policy b. The 3 nonforfeiture options are Cash Surrender, Reduced Paid-Up, and Extended Term c. They protect the policyowner against total loss of benefits if the policy should lapse or be canceled. d. They are used when the insured lives to the endowment date of the policy or at the insured's death

d. They are used when the insured lives to the endowment date of the policy or at the insured's death