Chapter 4 Quiz Questions

Which allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?

Payor Benefit

lady saves up dividend checks over the years and wants to use dividends to help pay for her next premium. What allows her to do this?

Reduction of Premium

An insured committed suicide one year after his life insurance policy was issued. The insurer will:

Refund the premiums paid.

If an insured receives accelerated death benefits, what is the least amount of the original death benefit that the beneficiary would receive after the insureds death?

0% because insured is allowed to take out 100% before his death.

if 100k in death benefit plus double indemnity and person dies in car wreck 10 weeks after wreck, how much does beneficiary get?

200k because he died within the 90 day period. so it is considered fatal.

If an insured has 50k whole life policy and at age 47 decides to cancel the policy and exercise the extended term option for the policy's cash value, (20k) what would be the face amount of the new term policy?

50k. The same.

Which best describes fixed-period settlement option?

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

Which is NOT typically excluded from life policies?

Death due to plane crash for a fare-paying passenger

Which is true about cash surrender nonforfeiture option?

Funds exceeding the premium paid are taxable as ordinary income.

An insured stops making payments on a loan taken from his cash value policy. What will probably happen?

The policy will terminate when the loan amount with interest equals or exceeds the cash value.

Under an extended term nonforfeiture option, the policy cash value is converted to:

The same face amount as in the whole life policy

What type of ins. would be used for a return of premium rider?

increasing term

If 100k death benefit with triple indemnity but the guy in car crash caused accident and indemnity doesn't pay anything, what does beneficiary get?

100k

When life ins. policy is cancelled and the insured has selected the extended term nonforfeiture option, the cash value will be used to purchase term ins. that has a face value of:

Equal to the original policy for as long a period of time that the cash values will purchase.

What type of insurance would be used for a "return of premium rider?"

Increasing term

What is the benefit of choosing extended term as a nonforfeiture option?

It has the highest amount of ins. protection

When someone receives benefits from a disability income benefit rider he receives:

Monthly premium waiver and monthly income

A rider that provides coverage on the insured's family members is called:

Other-insured rider

What type of beneficiary designation allows the benefit to pass from a deceased primary beneficiary to the beneficiary's heirs, instead of splitting the benefit among surviving primary beneficiaries?

Per Stirpes

All are beneficiary designations:

Primary, Tertiary, Contingent...NOT "Specified"

The interest earned on policy dividends is:

Taxable

An insured and his wife are both in a head on collision. Husband dies instantly and wife dies 15 days later. Company pays death benefit to the estate of insured. This indicates that the life ins. had what provision?

common disaster

What is true about the 10-day free-look period?

it begins when the policy is delivered.

someone was 40 when getting policy and three years later was thought to be 45 but is actually 43. he will receive a:

reduced death benefit

Which of the following determines the length of the time that benefits will be received under the Fixed-amount settlement option?

size of each installment

The paid-up addition option uses the dividend:

to purchase a smaller amount of the same type of ins. as the original policy

The accelerated benefits provision will provide for an early payment of the death benefit when:

Insured becomes terminally ill

The ownership provision entitles the policy owner to do all of the following except:

Set premium rates

When a life ins. policy stipulates that the beneficiary will receive payments in specified installments or for a specified number of years, what provision prevents the beneficiary from changing or borrowing from the planned installments?

Spendthrift Provision

Wife wants to name husband a beneficiary but wants to retain her ownership. What does she name the husband as a beneficiary?

revocable

A rider that will adjust the face amount based on a specific index such as Consumer Price Index is called:

Cost of Living Rider

What is a major problem with naming a trust as the beneficiary of a life insurance policy?

They are expensive to administer

Which is true concerning irrevocable beneficiaries?

They can be changed only with the written consent of that beneficiary

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called:

Waiver of Premium

Waiting period for waiver of premium rider for disability insurance?

6 months

According to the Entire Contract provision, a policy must contain:

A copy of the original application for insurance.

Which of the following would be deducted from the death benefit paid to a beneficiary, if a partial accelerated death benefit had been paid while the insured was still alive?

Amount paid with the accelerated benefit, plus the earnings lost by the ins. company in interest income from the accelerated benefit.

Who can make changes to the policy once it is in effect?

An executive officer of the insured

Which nonforfeiture option provides coverage for the longest period of time?

Reduced paid-up

If beneficiaries die before the insured, proceeds go to:.....when the insured dies.

The insured's estate

If an insured continually uses the automatic premium loan option to pay the policy premium:

The policy will terminate when the cash value is reduced to nothing.

Which is true about spouse term rider?

the rider is usually level term insurance

The paid-up addition option uses the dividend:

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

An insured misstates her age at the time the life insurance application is taken. This may result in:

Adjustment in the amount of death benefit.

When the policy owner specifies a dollar amount in which installments are to be paid, he has chosen which settlement option?

Fixed Amount

An individual buys a policy that he can afford but he wants a policy where he can add to in he future for additional coverage. What option should he take?

Guaranteed insurability option

a couple owns children term rider. The daughter is nearing age to convert ins. What will she need for proof of insurability?

It isn't required for her in this case.

Which of the following is true regarding a single life settlement option?

It provides income the beneficiary cannot outlive

Which of the following statements about the reinstatement provision is true?

It requires the policy owner to pay all overdue premiums with interest before the policy is reinstated.

What is FALSE regarding guaranteed insurability rider?

This rider is available to all insureds with no additional premium.

Which settlement option allows the insurer to retain the face amount but pay some income based on gain on the proceeds to the beneficiary at regular intervals?

interest only

Which applies to the 10-day free look privilege?

it permits the insured to return the policy for a full refund of premiums paid.

The dividend option in which the policy owner uses dividends to purchase a term policy for one year is referred to as the:

one-year term option

Which explains the policy owner's right to change beneficiaries, choose options, and receive proceeds of a policy?

owners rights

When a policy owner designates a group of individuals as beneficiary without specifically naming the individuals, this is called:

Class designation

Someone borrowed money at the bank to send his daughter to college. instead of purchasing credit life ins., he used existing life ins. policy to secure the debt. this is a:

Collateral Assignment

Which rider deals with inflation?

Cost of Living Rider

Which beneficiary would not be able to directly receive the death benefit?

a minor (son)

When father owns payor benefit for daughter and becomes handicapped, the premiums on daughters insurance:

waived until she is 21

Which is true about the cash surrender nonforfeiture option?

Funds exceeding the premium paid are taxable as ordinary income.

couple are to receive the proceeds of a life ins. policy jointly until the first dies. If either should die within a specific time, the other will receive benefits until the end of the specified time. The settlement is known as:

Joint Life with Term Certain

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

Cash Option

What required provision protects against unintentional lapse of the policy?

Grace Period

Life income joint and survivor settlement option guarantees:

Income for 2 or more recipients until they die.

The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the:

Incontestability Clause

During partial withdrawal from an IUl, which portion will be taxed?

Interest

Which statement about suicide clause in a life policy is true?

Suicide is excluded for a specific period of years and covered thereafter.

All are true regarding the accumulation of interest option except:

the interest credited under this option is not taxable since it remains inside the ins. policy. (that interest is taxable)

Items stipulated in the contract that the insurer will not provide coverage for are found in the:

Exclusions clause

Which life ins. settlement guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period during which, if the original recipient dies, the payments goto a designated beneficiary?

Life income with period certain

Which rider would NOT cause the death benefit to increase?

Payor Benefit Rider

If the policy owner/beneficiary/insured are all different people, who has the ownership rights?

Policy owner

Which of the following is true regarding the spendthrift clause in life insurance policies?

It can protect the policy proceeds from creditors of the beneficiary

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.

What is true about accidental death rider?

It will pay double or triple the face amount.

If a settlement option is not chosen by the beneficiary or policy owner, which option will be used?

Lump Sum

An insurer has continuous premium whole life policy. She wants to use dividends to pay off policy sooner. She is using:

Paid-up Option