chapter 5

The policyowner is permitted 10 days from the date the policy is delivered to examine the policy. This is called?

Free look provision

The ____ cause is used to prevent creditors from seizing life insurance policy proceeds, provided there is at least one named beneficiary, excluding the insured's estate.

Spendthrift trust clause

What happens if the insured dies during the grace period?

The premium and interest is deducted from the death benefits

the beneficiary has a vested interest in the policy, even if he/she predeceases the policyowner.

Absolute

______ policies pay a lump sum payment if the insured dies in an accident, or loses major body parts in an accident.

Accidental death and dismemberment (AD&D)

states that a policyowner must pay a premium in exchange for the insurer's promise to pay benefits.

Consideration clause

When is the substitute insured rider used?

In business life

the insurer's basic promise to pay a sum of money in the event of a covered loss to the beneficiary.

Insuring clause

temporary option until proceeds are paid out using one of the other settlement options

Interest only

Settlement option that is not taxable to beneficiary

Lump sum (cash payment)

the insurer will not pay the claim if the insured dies while in active military service.

Status clause

_____ allows the insured to receive a portion of the death benefit prior to death if the insured has a terminal illness.

The accelerated benefit rider, also referred to as a living benefit rider

The _____ rider pays an additional sum, termed the principal sum, to the beneficiary if the insured dies due to an accident. The amount paid is a multiple of the policy face amount such as double or triple.

The accidental death benefit (ADB) rider, also referred to as a multiple indemnity rider,

Which life insurance rider affecting the policy's death benefit protects against the chance of depleting income during prolonged life? Select one: a. Annuity rider b. Cost of living rider c. Term rider d. Guaranteed insurability

a. Annuity rider

Which life insurance dividend option does not increase a policy's cash value? Select one: a. Cash payment b. Accumulate at Interest c. Paid-up insurance d. Paid-up additions

a. Cash payment

When the extended term option is used, the face amount is: Select one: a. Equal to the original coverage b. Lower than the original coverage c. Higher than the original coverage d. The amount the cash value can purchase for the extended policy term

a. Equal to the original coverage The cash value acts as a single premium to purchase the extended term coverage, and the amount of the paid-up coverage is equivalent to the original policy's face value.

Which settlement option pays the growth on the principal in installments? Select one: a. Interest-only b. Fixed-period installments c. Fixed-amount installments d. Life income

a. Interest-only

The automatic dividend option is: Select one: a. Paid-up additions b. Cash payment c. One-year term d. Paid-up insurance

a. Paid-up additions

This dividend option provides additional permanent coverage: Select one: a. Paid-up additions b. One-year term c. Accumulate at interest d. Cash payment

a. Paid-up additions

Which dividend option allows the policyowner to use the dividend to offset the cost of a future premium payment? Select one: a. Reduction of premium payments b. Accumulation at interest c. One-year term d. Paid-up additions

a. Reduction of premium payments

_______________ allow the policy proceeds to be retained by the insurer and paid out gradually. Select one: a. Settlement options b. Policy loan provisions c. Policy exclusions d. Premium payment modes

a. Settlement options

Irrevocable beneficiaries are either _______ or _____.

absolute or reversionary.

The principal sum of a AD&D rider attached to a life insurance policy pays: Select one: a. A principal sum if the insured loses one leg b. A principal sum if the insured loses both arms c. A principal sum if the insured loses one hand d. A principal sum if the insured loses vision in one eye

b. A principal sum if the insured loses both arms

Eddie wants to use a nonforfeiture option. Which of the following may Eddie not use? Select one: a. Cash surrender value b. Accumulation at interest c. Extended term d. None of the above

b. Accumulation at interest

Which life insurance rider pays an amount equal to the total premiums paid as long as the insured dies during a certain time period, as stated in the policy? Select one: a. Return of cash value b. Return of premium c. Waiver of premium d. Payor rider

b. Return of premium

When Dakota's life insurance policy was written, it stated on the policy that Dakota was male. However, Dakota is female. On average, women tend to live several years longer than men. When Dakota died this misstatement was discovered. How did this impact the policy? Select one: a. The premium was increased. b. The death benefit was increased. c. The premium was lowered. d. The death benefit was lowered.

b. The death benefit was increased.

Jon's life insurance policy contains a disability income benefit that will pay him a periodic income in the event he becomes disabled. What factor determines the amount of the benefit? Select one: a. If it is paid weekly b. The face amount of the policy c. If it is paid monthly d. The nature of the disability

b. The face amount of the policy

The appropriate rider allows premium payments to be waived in the event of disability. What is the normal waiting period for premiums to be waived? Select one: a. 30 days b. 60 days c. 3 or 6 months d. 1 year

c. 3 or 6 months

All of the following are nonforfeiture options, EXCEPT: Select one: a. Cash surrender value b. Reduced paid-up insurance c. Accumulate at interest d. Extended term

c. Accumulate at interest

An insured commits suicide while the suicide clause is in effect. What will the insurer do? Select one: a. Pay the death benefit b. Pay half the death benefit c. Return all premiums to the beneficiary d. Return all premiums plus interest to the beneficiary

c. Return all premiums to the beneficiary

What is the term for a policy element that adds or takes away coverage? Select one: a. Policy b. Contract c. Rider d. Clause

c. Rider

All of the following are ownership rights, EXCEPT: Select one: a. Right to name a beneficiary b. Right to take out a policy loan c. Right to make changes to the policy d. Right of assignment

c. Right to make changes to the policy

Extended term is another option of the nonforfeiture provision. If Clarice opts to no longer pay the premiums on her $100,000 whole life policy and exchanges it for an extended term policy, what will be the face value of the term insurance policy? Select one: a. $10,000 b. $25,000 c. $50,000 d. $100,000

d. $100,000

In most states, the period of contestability for material misrepresentations made on a life insurance application is: Select one: a. 90 days b. 10 days c. 3 years d. 2 years

d. 2 years

The _____ states that the policy is executed (established) when all parties to the contract have met the policy's conditions.

execution clause

The _____ rider allows the policyowner to waive premium payments during a disability, and keeps the policy in force.

waiver of premium

If the policyowner becomes totally and permanently disabled, the insurer will pay the insured a periodic income, and in some policies, it also waives the policy premiums. The periodic income is based on the policy's face amount and is paid weekly or monthly during the insured's disability.

Disability income rider

This is defined as "by the head". Under this class designation, only the living heirs receive a portion of the policy proceeds.

Per Capita

____ allows a universal life policyowner who becomes disabled to waive the cost of death protection, but does not waive the cost of premium required to build cash value.

The waiver of cost of insurance, or waiver of monthly deductions rider

Which clause states that the policy owner must pay something of value for the insurer's promise to pay benefits? Select one: a. Consideration clause b. Reinstatement clause c. Insuring clause d. Entire Contract clause

a. Consideration clause

The Guaranteed Insurability Rider, or GIR, allows the insured to buy: Select one: a. More insurance coverage at any time b. More insurance coverage at specified points in the future, without proof of insurability c. More insurance coverage when the insured retires, upon request by the insured d. More insurance coverage when the insured loses their job, with proof of insurability

b. More insurance coverage at specified points in the future, without proof of insurability

Which of the following provisions allows a life insurance policy to continue beyond the grace period when a premium is overdue and not paid? Select one: a. Assignment clause b. Nonforfeiture option c. Consideration clause d. Insuring clause

b. Nonforfeiture option

Some policies offer the policyholder the opportunity to purchase additional insurance when they get married, or have children. What is the factor that determines the rate of the additional coverage? Select one: a. The initial date of the policy b. The attained age of the insured when the additional insurance is purchased c. The exclusion of a waiver of premium rider d. The reason for wanting the additional insurance

b. The attained age of the insured when the additional insurance is purchased The attained age of the policyholder determines the rate when additional insurance is purchased. The date of the policy and existence of other riders is not relevant for determining the rate.

What nonforfeiture option permits the policyowner to use the cash values to purchase paid-up term life insurance coverage? Select one: a. None b. Cash surrender value c. Extended term d. Reduced paid-up insurance

c. Extended term

The waiver of premium rider can only be added to a term policy because there is no _____

cash value.

Which of the following explanations best describes the purpose of the waiver of premium provision of a life insurance policy? Select one: a. It decreases the monthly amount of an insured's premium payments. b. It decreases the frequency of an insured's premium payments. c. It waives the insured's premiums if the insured becomes disabled. d. It waives the insured's premiums if the insured is totally disabled before a specified age.

d. It waives the insured's premiums if the insured is totally disabled before a specified age.

Of the following life insurance policy riders, which does not alter the amount of the death benefit? Select one: a. Cost of living b. Return of premium c. Term d. Payor

d. Payor

Rick is planning on getting married next month. He currently has a $100,000 whole life participating policy. Because he is planning a family, he wants to increase his life insurance while keeping his costs down. Which of the following options would best suit his needs? Select one: a. Rick could use his dividends to purchase one-year term insurance. b. Dividends could be applied against Rick's future premium payments. c. He could allow the dividends to accumulate at interest. d. Rick could use the dividends to purchase paid-up additions.

d. Rick could use the dividends to purchase paid-up additions.

When a juvenile covered by a payor rider reaches the specified age, what happens to the ownership of the policy? Select one: a. It stays with the original policyholder. b. The policy expires. c. The premium is reduced. d. The juvenile can assume ownership of the policy.

d. The juvenile can assume ownership of the policy.

Who may choose the settlement option for a life insurance policy? Select one: a. The insurer b. The policyowner c. The beneficiary d. The policyowner and the beneficiary

d. The policyowner and the beneficiary

The ______ sometimes referred to as the future increase option, permits the policyowner to buy additional permanent life insurance coverage at specific points in time in the future (i.e., marriage, births, etc.) without requiring the insured to provide proof of insurability.

guaranteed insurability rider (GIR),

The ____ is a type of accelerated benefit, which is used to pay long-term care costs.

long-term care rider

The ____ rider is used for juvenile life insurance.

payor

Accidental Death and Dismemberment Rider (AD&D) = Pays ___ sum

princple

The _____ value rider allows a whole life policy's cash value to be included in the death benefit.

return of cash

The_____rider pays the total amount of premiums paid into the policy as long as the insured dies within a certain time period specified in the policy. The death benefit is comprised of the face amount plus the total premiums paid into the policy.

return of premium

The _______, also known as the exchange privilege rider, allows the insured under a life insurance policy to be changed.

substitute insured rider

Investor Originated Life Insurance (IOLI)

third party ownership -investors solicit elderly people to purchase life insurance, and an agent or broker agrees to loan insureds money to pay the premiums for a period of time, with the agreement that after two years of paying premiums the investors become the policyowners, and receive the policy death benefits upon the insured's death.

This solves the problem of determining the beneficiary who will receive the policy proceeds if the insured and the primary beneficiary are killed at the same time, due to a common accident.

uniform simultaneous death act

Asbolute assignment (Complete) = Collateral assignment (partial) =

Permanent Temporary

Which provision prevents the insurer from making changes to a contract by citing documents not included in the policy itself? Select one: a. Entire Contract provision b. Free Look provision c. Reinstatment provision d. Incontestability clause / provision

a. Entire Contract provision

if an irrevocable beneficiary predeceases the insured, the policyowner no longer requires that beneficiary's written consent to exercise policy ownership rights.

Reversionary

are policy elements that "ride on" or add to the existing coverage by modifying provisions or coverage.

Riders

requires that the insured and primary beneficiary's deaths be from unrelated causes.

Short term surviorship

Jennifer is trying to add her insurance premium payments to her budget. All of the following are accepted payment mode options, EXCEPT: Select one: a. When she feels like it b. Monthly c. Quarterly d. Annually

a. When she feels like it

Stranger-Originated Life Insurance (STOLI)

Life insurance arrangement in which a person with no relationship to the insured purchases a life policy on the insured's life with the intent of selling the policy to an investor and profiting financially when the insured dies. (third party ownership)

is defined as "by the root". Under this class designation, deceased beneficiaries would have their portion of the policy proceeds distributed to their children. This means that the insured's grandchildren are eligible to receive policy proceeds if the insured's child predeceases the insured.

Per Stirpes

the insurer will not pay the claim if the insured dies due to an act of war.

Results clause

misstatement of age or sex clause

The benefits and/or premium would be adjusted to an amount that would have been required if the insurer had the correct age or sex.

the stipulated period of time policyowners are allotted to pay an overdue premium, during which the policy remains in force.

The grace period

Which of the following is a beneficiary designation based on a group of people with shared characteristics? Select one: a. Class designation b. Individual c. Trust d. Blanket group

a. Class designation

How long is the loan period on STOLI arrangements? Select one: a. 4 years b. 1 year c. 2 years d. 3 years

c. 2 years

What is the primary purpose of the entire contract provision in a life insurance policy? Select one: a. Provide specifics on when the premium are due b. Provide specifics on how premiums are paid c. Provide assurance that the policyholder has all necessary policy documents in their possession d. Provide details of policy loan provision

c. Provide assurance that the policyholder has all necessary policy documents in their possession

HIPAA requires that proceeds from a viatical settlement are exempt from ________.

federal income tax.

pays a fixed amount until proceeds are exhausted

fixed amount installments

____involve how policy funds are utilized.

options

The_____ provision permits the policyowner to reinstate a policy that has lapsed, as long as the policyowner can provide proof of insurability.

reinstatement

The policyowner can change ____ beneficiaries without their consent.

revocable

All of the following is true regarding lump-sum payment of life insurance policy proceeds, EXCEPT: Select one: a. Distribution is taxed. b. Distribution is not taxed. c. The policyowner has the right to select the settlement option. d. Cash payment, or lump-sum payment, is still a common way of receiving life insurance policy proceeds.

a. Distribution is taxed.

This provision identifies the named insured, type, and amount of coverage provided by the policy: Select one: a. Insuring clause b. Execution clause c. Consideration clause d. Policy face

a. Insuring clause

What life insurance settlement option permits the insurer to retain the policy proceeds, which become principal, and pays out only the growth on the principal to the beneficiary on a regular basis? Select one: a. Interest only b. Period certain c. Fixed-amount installment d. Life income

a. Interest only

Marcella purchases a modified life insurance policy at the age of 31. Thinking she could get a slightly better rate on her policy, she lists her age as 21. If the insurance company discovers the error upon Marcella's death, what action will the insurance company take? Select one: a. Pay the full death benefit b. Void the policy for misrepresentation and fraud c. Pay the death benefit based on Marcella's actual age d. Refund the premiums paid without interest

c. Pay the death benefit based on Marcella's actual age

What are the three situations where the insurance company has the right to contest or void a policy:

1. Lack of insurable interest 2. Impersonation 3. Murder

In the common disaster clause, the beneficiary must outlive the insured by how many days?

15-30

Payment of claims is paid in how many days?

60

All of the following are true regarding the period certain life insurance settlement option, EXCEPT: Select one: a. Payments consist of principal and interest. b. The principal reduces to zero by the end of the period. c. The amount of each installment is based on the length of the period, the amount of the policy proceeds and the interest rate. d. Shorter payment periods result in lower payments.

d. Shorter payment periods result in lower payments.

Which of the following prevents creditors from seizing life insurance policy proceeds as long as there is at least one living named beneficiary, excluding the insured's estate? Select one: a. Common disaster clause b. Facility of payment provision c. Uniform Simultaneous Death Act d. Spendthrift clause

d. Spendthrift clause

All of the following are true regarding the fixed-amount installment life insurance settlement option, EXCEPT: Select one: a. Payments consist of principal and interest. b. Payments are made until the principal and interest reach zero. c. The length of time installments are paid depends on the amount of the policy proceeds. d. The larger the payment amount, the longer time period payments will be received.

d. The larger the payment amount, the longer time period payments will be received.

depletes funds over a fixed period

fixed period installments

three nonforfeiture options:

1. Cash surrender 2. Extended term insurance 3. Reduced paid-up insurance

What would an insurance company do if an insured commits suicide within the contracts contestable period? Select one: a. Deny the claim due to the suicide clause b. Pay the claim in full c. Pay half the claim d. Return half the premiums

a. Deny the claim due to the suicide clause

All of the following statements are true about the accidental death benefit (ADB), EXCEPT: Select one: a. The amount paid is one half of the face amount of the life insurance policy. b. The policy pays an additional sum if the insured dies due to an accident. c. The insured must die within a certain time period after the accident (usually 90 days). d. The accidental death benefit does not build cash value.

a. The amount paid is one half of the face amount of the life insurance policy.

Which of the following best describes the return of premium rider Select one: a. The return of premium rider pays the total amount of premiums paid into the policy as long as the insured dies within a certain time period specified in the policy. b. The return of premium rider allows a whole life policy's cash value to be included in the death benefit. c. The return of premium rider allows a universal life policyowner who becomes disabled to waive the cost of death protection. d. The return of premium rider allows the policyowner to waive premium payments during a disability, and keeps the policy in force.

a. The return of premium rider pays the total amount of premiums paid into the policy as long as the insured dies within a certain time period specified in the policy.

Riders covering additional insureds can be added to life policies. A popular rider is the children's term rider. All of the following can be covered by the children's term rider, EXCEPT: Select one: a. Younger siblings of the policyholder b. Step children c. Legally adopted children d. Biological children

a. Younger siblings of the policyholder

Which nonforfeiture option is the "automatic" option? Select one: a. None b. Extended term option c. Reduced paid-up d. Cash surrender

b. Extended term option

Randy drives racecars and scuba dives in his spare time. Will he be able to purchase life insurance with these types of hobbies? Select one: a. He will not be able to purchase life insurance. b. He will be able to purchase life insurance but his premiums will be higher. c. The insurance company will make him carry extra insurance because of his hobbies. d. Yes, his hobbies will not impact the death benefit or premiums.

b. He will be able to purchase life insurance but his premiums will be higher.

In addition to being a commercial pilot, Michael also flies his own private small plane. What will most likely happen when he applies for life insurance? Select one: a. The policy will exclude coverage for private aviation activities. b. He will be charged a higher premium to compensate for the added risk. c. He will not be able to buy life insurance. d. He will need to quit flying.

b. He will be charged a higher premium to compensate for the added risk.

Chuck is in the military. How does this affect payment of the death benefit on his life policy? Select one: a. His military service does not affect the death benefit. b. His policy excludes death while on active military service. c. Death due to an act of war is not excluded. d. He will not be able to purchase life insurance.

b. His policy excludes death while on active military service.

Some riders can affect the death benefit of a life insurance policy. Which of the following riders can decrease the death benefit? Select one: a. Payor rider b. Waiver of premium rider c. Long-term care rider d. Cost of living rider

c. Long-term care rider

Which of the following is a guarantee that is required by law to be a part of life insurance polices that build cash value? Select one: a. Insuring clause b. Settlement option c. Nonforfeiture option d. Dividend option

c. Nonforfeiture option

What nonforfeiture option allows the policyowner to purchase paid-up whole life coverage at a reduced face amount based on the policy's existing cash value? Select one: a. Extended term b. Cash surrender value c. Reduced paid-up insurance d. None

c. Reduced paid-up insurance

Which of the following is not a dividend option? Select one: a. Reduction of premium payments b. Paid-up additions c. Reduced paid-up insurance d. Cash payments

c. Reduced paid-up insurance

All of the following are true regarding the reduced paid-up insurance nonforfeiture option for life insurance policies, EXCEPT: Select one: a. With the reduced paid-up insurance option, the policy may be reinstated to the original face amount within the terms of the reinstatement provision. b. Any outstanding policy loans plus interest would be deducted from the cash surrender value prior to purchasing reduced paid-up insurance. c. The reduced paid-up insurance option allows the policyowner to purchase paid-up term coverage at a reduced face amount based on the amount of the policy cash value. d. The cash values act as a single premium to purchase reduced paid-up insurance.

c. The reduced paid-up insurance option allows the policyowner to purchase paid-up term coverage at a reduced face amount based on the amount of the policy cash value.

The ______ rider allows the policy face amount to be adjusted to account for inflation based on the consumer price index (CPI).

cost of living adjustment (COLA)

Life insurance policies that pay dividends are referred to as "participating policies". Participating policies pay dividends to policyholders. Which of the following is a true statement about dividends? Select one: a. Dividends are not taxable. b. Dividends are usually paid on an annual basis. c. Dividends are actually a return of overcharged premiums. d. All of the above

d. All of the above

Which of the following nonforfeiture options does not allow the insured to reinstate the policy: Select one: a. None b. Extended term option c. Reduced paid-up d. Cash surrender

d. Cash surrender

Under what conditions will the waiver of premium rider pay benefits? Select one: a. If the insured is disabled b. If the insured is partially disabled c. If the insured is totally disabled d. If the insured is totally and permanently disabled

d. If the insured is totally and permanently disabled

The stipulated period of time, allotted by the insurance company, to allow a policyholder to make an overdue payment while the policy remains in force and coverage is provided is called the _____________. Select one: a. Reinstatement clause b. Grace period c. Loan provision d. Consideration clause

b. Grace period

What happens if a policyowner does not specify a settlement option for their life insurance policy? Select one: a. The policy will be canceled and marked void. b. The life income settlement option will be automatically selected. c. The policy proceeds default to lump-sum payment. d. The period certain option is used.

c. The policy proceeds default to lump-sum payment.

A fixed period option pays policy proceeds in equal installments over a period of months or years. Which of the following is NOT considered when determining the amount of the installment? Select one: a. The amount of the proceeds b. The frequency of the payments c. The relationship of the beneficiary to the insured d. The rate of interest on the proceeds

c. The relationship of the beneficiary to the insured

Who are the named individuals or entities the policyowner designates to receive life insurance policy proceeds upon the insured's death? Select one: a. Insureds b. Policyowners c. Insurers d. Beneficiaries

d. Beneficiaries

With _____ beneficiaries, the policyowner must receive their written consent to exercise any ownership rights, except for the right to pay premiums.

irrevocable

____ are the characteristics, privileges, duties of all parties, and rights of a policy.

Provisions

All of the following are life insurance settlement options, EXCEPT: Select one: a. Interest only b. Fixed-period installments c. Automatic premium loan d. Life income

c. Automatic premium loan

Which of the following settlements of a life insurance policy is taxable? Select one: a. Lump sum b. Paid up additions c. Interest-only d. Double indemnity

c. Interest-only

What is it called when you transfer policy rights to another person or entity?

Assignment clause

Insurer automatically uses the policy cash value to pay overdue premium

Automatic Premium Loan (APL)

The ____ allows the insurer to choose a beneficiary if the insurer cannot get in contact with the named beneficiaries after a certain amount of time.

Facility-of-payment Provision

Gerry forgets to pay his life insurance premium, and the policy lapses. If he is within the reinstatement period and decides to reinstate his policy, he will be required to take all of the following actions, EXCEPT: Select one: a. Surrender or cancel the policy within 10 years of the reinstatement date b. Pay all past-due premiums c. Provide proof of evidence of insurability d. Pay any back-due interest on an outstanding policy loan

a. Surrender or cancel the policy within 10 years of the reinstatement date

James is past due on his life insurance premium by 5 days. His policy has a 30 day grace period. If James dies on day 15 of his grace period, what would the beneficiary receive? Select one: a. The full face amount, minus any past due premium b. A refund of past premiums c. The full face amount d. Nothing since James' premiums are past due

a. The full face amount, minus any past due premium

Gail has no children and has decided to make a gift of her life insurance to her alma mater. This type of assignment is voluntary and also usually absolute and complete. Specifics of this type of assignment include: Select one: a. The policyowner cannot recover surrendered rights. b. All of the above c. The assignee has the right to use the cash value of the policy. d. All the rights of the policy are assigned.

b. All of the above

Withdrawals or partial surrenders can be made on the cash value of a universal life policy. Which of the following is specified in the policy? Select one: a. How to convert the withdrawal to a loan b. How much can be withdrawn c. The amount of tax on the withdrawal, if it is over basis d. Timing on repaying the withdrawal

b. How much can be withdrawn

A settlement option that would leave the proceeds of the insurance policy with the insurer and the insurer would pay interest to the beneficiary on an installment basis is called: Select one: a. Fixed period option b. Interest only option c. Life income option d. Withdrawal provision

b. Interest only option

This annuity provides a husband and wife with lifetime income while either spouse is alive: Select one: a. Refund life annuity b. Joint and survivor annuity c. Life annuity with period certain d. Life income certain

b. Joint and survivor annuity

Which life insurance settlement option uses an annuity to pay policy proceeds to the beneficiary for a set number of years? Select one: a. Interest only b. Period certain c. Fixed-amount installment d. Life income

b. Period certain

The insured and the primary beneficiary are killed in a car accident. Which of the following is true according to the Uniform Simultaneous Death Act? Select one: a. Policy proceeds are paid as if the insured died first. b. Policy proceeds are paid as if the primary beneficiary died first. c. Policy proceeds are always paid to the primary beneficiary's estate. d. Even if the insured dies first, the primary beneficiary must outlive the insured by a certain number of days in order for the policy proceeds to be paid to the primary beneficiary's estate.

b. Policy proceeds are paid as if the primary beneficiary died first.

The Common Disaster Clause: Select one: a. Assumes that in a common accident involving the insured and primary beneficiary, the primary beneficiary is assumed to have died first b. Requires the primary beneficiary to outlive the insured by a certain number of days in order to receive the death benefit in a common disaster between the insured and the primary beneficiary c. Pays double the death benefit d. Cancels and voids a life insurance policy

b. Requires the primary beneficiary to outlive the insured by a certain number of days in order to receive the death benefit in a common disaster between the insured and the primary beneficiary

The insuring clause of a policy includes all of the following, EXCEPT: Select one: a. The names of covered individuals b. The amount of the policy premium c. The effective date of the policy d. The period of coverage of the policy

b. The amount of the policy premium

All of the following options are available if the only logical beneficiary is a minor, EXCEPT: Select one: a. A guardian can be appointed. b. The benefits can go directly to the estate of the insured. c. A trust can be established. d. The insurance company can hold the proceeds until the minor comes of age.

b. The benefits can go directly to the estate of the insured.

What happens if an insured commits suicide 3 years after the policy inception? Select one: a. No benefit is paid. b. The death benefit is paid. c. The premiums are refunded. d. Nothing

b. The death benefit is paid.

Which of the following best describes the automatic premium loan provision of a life insurance policy? Select one: a. Withdrawals or partial surrenders of policy cash value can be made; the policy specifies how much can be withdrawn and at what frequency. b. The insurer will automatically use the policy cash value to pay an overdue premium. c. Modifications to the policy must be made by an authorized officer of the insurer and attached to the policy. d. A policy loan in an amount up to the current cash value, less any existing indebtedness may be made.

b. The insurer will automatically use the policy cash value to pay an overdue premium.

Of the following individuals, who has the right to change the beneficiary designations in a life insurance policy? Select one: a. The insured b. The policyowner c. The revocable beneficiary d. The insurance company

b. The policyowner

How long is the suicide clause typically in effect? Select one: a. The entire policy term b. Two years from the policy effective date c. Two years prior to the insured's death d. Four years

b. Two years from the policy effective date

Which of the following is not a living benefits option for using cash value in a life insurance policy? Select one: a. Accelerated benefits b. Viatical settlements c. 1035 policy exchange d. Life Settlement

c. 1035 policy exchange

Julie applies for a life insurance policy. Her consideration consists of: Select one: a. Application b. Initial premium c. Completed application and initial premium d. Statements made on the application and promise to pay premiums

c. Completed application and initial premium

Which life insurance settlement option uses an annuity to pay policy proceeds in which the payment amount is specified instead of a period of time? Select one: a. Interest only b. Period certain c. Fixed-amount installment d. Life income

c. Fixed-amount installment

There are different kinds of beneficiaries in a life policy. When Alice dies, the death benefit will be paid to Walter. If Walter dies before Alice, the benefit would go to Alexander. Which of the following statements is true? Select one: a. The tertiary beneficiary is Walter and Alexander is the secondary beneficiary. b. Alexander is the tertiary beneficiary. c. The primary beneficiary is Walter and Alexander is the contingent beneficiary. d. Alice is the tertiary, as the policyholder, and Walter is the contingent beneficiary.

c. The primary beneficiary is Walter and Alexander is the contingent beneficiary.

the ____ clause protects the contingent beneficiaries' rights by stipulating a certain number of days the primary beneficiary must outlive the insured after a common accident causing near-simultaneous death in order for the primary beneficiary to receive the policy proceeds; otherwise, the contingent beneficiaries receive the policy proceeds.

common disaster

All of the following statements are false regarding who may make modifications to a life insurance policy, EXCEPT: Select one: a. Modifications can be made by any employee of the insurer. b. Insurance producers can make any policy change. c. Only the insurer has the right to request changes to a policy. d. Changes to the policy can only be implemented by an executive officer of the insurer.

d. Changes to the policy can only be implemented by an executive officer of the insurer.

Which of the following is false regarding the period certain life insurance settlement option? Select one: a. Longer payment periods result in lower payments. b. Income is guaranteed for the entire period specified. c. The fixed-period, or period certain, installment option uses an annuity to pay the policy proceeds to the beneficiary for a certain number of years. d. If the recipient dies before the period ends, the remaining balance is forfeited.

d. If the recipient dies before the period ends, the remaining balance is forfeited.

Of the following life insurance settlement options, which pays only the interest earned on the principal in periodic payments? Select one: a. Life income b. Fixed-amount installment c. Joint and survivor d. Interest-only

d. Interest-only

Of the following settlement options for life insurance, which can result in the insurer paying more in benefits than the principal plus interest? Select one: a. Interest only b. Fixed-installment c. Fixed-period d. Life income

d. Life income

George bought a $300,000 whole life policy when he was employed as a bank teller. Four years later, he changes jobs and begins working in a coal mine. If he is killed while working in the mine, what will the insurer do? Select one: a. Deny the claim because the insured's occupation listed in the application did not match the insured's actual occupation b. Void the policy c. Void the policy and return all premiums with interest to the insured's beneficiary d. Pay the claim

d. Pay the claim

Mary and Philip are married. Philip named Mary as the primary beneficiary of his life insurance policy. His children from a prior marriage are contingent beneficiaries. Under the Uniform Simultaneous Death Act, who will receive the death benefit if Mary and Philip are in a car accident and there is no evidence of who died first? Select one: a. Mary's estate b. Philip's estate c. Mary's children from her prior marriage d. Philip's children from his prior marriage

d. Philip's children from his prior marriage

If an irrevocable beneficiary is named on a life insurance policy, all of the following statements are true, EXCEPT: Select one: a. The policy owner pays the premium. b. Irrevocable beneficiaries must consent to the policy owner canceling the policy. c. Policy owners need consent to assign the policy. d. Policy owners can borrow from cash value without consent.

d. Policy owners can borrow from cash value without consent.

If a policy loan is unpaid, the automatic premium loan provision has the effect of deducting the amount of the loan with interest from the death benefit. What should the policyowner do to avoid this reduction in the death benefit? Select one: a. Supply the insurance company with proof of insurability b. Repay the loan c. Nothing d. Repay the loan with interest

d. Repay the loan with interest

Mr. Brown committed suicide during the suicide clause of his insurance policy. The insurance company will: Select one: a. Cancel and void the policy b. Keep the entire death benefit c. Pay only the death benefit d. Return all premiums to the beneficiary

d. Return all premiums to the beneficiary

Which beneficiary designation is most appropriate for a person who wants to name his spouse as a beneficiary of his life insurance policy, and simultaneously retain full policy ownership rights? Select one: a. Full beneficiary b. Partial beneficiary c. Irrevocable beneficiary d. Revocable beneficiary

d. Revocable beneficiary

The ____ prevents the insurer from denying a claim or voiding a life insurance policy, except for nonpayment of premiums, after the policy has been in force for a certain number of years.

incontestability clause

The ____ provision places a limit on the period in which a claimant can file suit against an insurer.

legal action, 60 days from proof of loss

Pays a guaranteed installment as long as the recipient lives. Principle is forfeited upon death

life income