Life Insurance- Chapter 4

The Ownership provision entities the policyowner to do all of the following EXCEPT a. Designate a beneficiary b. Set premium rate c. Receive a policy loan d. Assign the policy

b. Set premium rate

What required provision protects against unintentional lapse of the policy? a. Payment of premiums b. Reinstatement c. Grace period d. Assignment

c. Grace period

The interest earned on policy dividends is a. Tax deductible b. 40% taxable c. Taxable d. Nontaxable

c. Taxable

How long will the beneficiary receive payments under the single life settlement option? a. For a specified period of time b. Until the insured's age 100 c. Until the beneficiary's death d. Until the insured's death

c. Until the beneficiary's death

An insured purchased a life insurance policy on his life naming his wife as primary beneficiary, and his daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit? a. If the insured died from accidental means b. If the primary beneficiary predeceased the insured c. When the insured dies, the primary and contingent beneficiaries share death benefits equally d. With the primary beneficiary's written consent

b. If the primary beneficiary predeceased the insured

Which of the following is NOT typically excluded from life policies? a. Death that occurs while a person is committing a felony b. Death due to war or military service c. Death due to plane crash for a fare-paying passenger d. Self-inflicted death

c. Death due to plane crash for a fare-paying passenger

When calculating the amount a policyowner may borrow from a variable policy, what must be subtracted from the policy's cash value? a. Mortality costs b. The cash surrender amount c. Outstanding loans and interest d. The face amount

c. Outstanding loans and interest

After a back injury, an insured is disabled for a year. His insurance policy carries a Disability Income Benefit rider. Which of the following benefits will he receive? a. Percentage of medical costs paid by the insurer b. Payments for life c. Yearly premium waiver and income d. Monthly premium waiver and monthly income

d. Monthly premium waiver and monthly income

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called a. Guaranteed insurability b. Waiver of cost of insurance c. Payor benefit d. Waiver of premium

d. Waiver of premium

Which is TRUE about the cash surrender nonforfeiture option? a. Funds exceeding the premium paid are taxable as ordinary income b. After the cash surrender, the insured is covered for a grace period of one month c. The policy remains active for some time after the policyholder opts for cash surrender d. The policyholder receives the original cash value of the policy

a. Funds exceeding the premium paid are taxable as ordinary income

If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a a. Guaranteed insurability rider b. Paid-up additions option c. Cost of living provision d. Nonforfeiture option

a. Guaranteed insurability rider

Life income joint and survivor settlement option guarantees a. Income for 2 or more recipients until they die b. Payment of interest on death proceeds c. Payout of the entire death benefit d. Equal payments to all recipients

a. Income for 2 or more recipients until they die

A rider attached to a life insurance policy that provides coverage on the insured's family members is called the a. Payor rider b. Other-insured rider c. Change of insured rider d. Juvenile rider

b. Other-insured rider

Which nonforfeiture option has the highest amount of insurance protection? a. Conversion b. Decreasing Term c. Reduced Paid-up d. Extended Term

d. Extended Term

All of the following are true regarding the guaranteed insurability rider EXCEPT a. The insured may purchase additional coverage at the attained age b. The insured may purchase additional insurance up to the amount specified in the base policy c. It allows the insured to purchase additional amounts of insurance without proving insurability only at specified dates or events d. The rider is available to all insureds with no additional premium

d. The rider is available to all insureds with no additional premium

An insured stops making payments on a loan taken from his cash value policy. What will most likely happen? a. The insurer will increase the interest rate on the loan and charge a penalty b. The insurer will not permit the policyowner to take out any more loans c. The policy will be reduced to an extended term option d. the policy will terminate when the loan amount with interest equals or exceeds the cash value

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

What is the waiting period on a Waiver of Premium rider in life insurance policies? a. 30 days b. 3 months c. 5 months d. 6 months

d. 6 months

Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium? a. Extended term b. Reinstatement c. Reduced paid-up option d. Automatic premium loan

d. Automatic premium loan

The interest earned on policy dividends is a. Tax deductible b. 40% taxable, similar to a capital gain c. Taxable d. Nontaxable

c. Taxable

Which of the following explains the policyowner's right to charge beneficiaries, choose option, and receives proceeds of a policy? a. Owner's Rights b. The Entire Contract Provision c. The Consideration Clause d. Assignment Rights

a. Owner's Rights

The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this? a. Reduction of premium b. Paid-up addition c. Accumulation at interest d. Cash option

a. Reduction of premium

Which of the following is true of a children's rider added to an insured's permanent life insurance policy? a. The policy covers only the natural children of the insured b. Each child covered must show evidence of insurability c. It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age d. It is permanent insurance

c. It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age

If the policyowner, the insured, and the beneficiary under a life insurance policy are three different people, who has the ownership rights? a. Beneficiary b. Insured c. Policyowner d. The insured and the policyowner

c. Policyowner

If a life insurance policy has an irrevocable beneficiary designation a. The owner can always change the beneficiary at will b. The beneficiary cannot be changed c. The beneficiary can only be changed with written permission of the beneficiary d. The beneficiary cannot be changed for at least 2 years

c. The beneficiary can only be changed with written permission of the beneficiary

Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean? a. The beneficiary will receive the lump sum, plus interest b. The primary beneficiary will receive the death benefit and the secondary beneficiaries will share the interest payments c. The beneficiary will only receive payments of the interest earned on the death benefit d. The beneficiary must pay interest to the insurer

c. The beneficiary will only receive payments of the interest earned on the death benefit

Which of the following is true about the mandatory 10-day free look in a Life Insurance policy? a. It is optional on all life insurance policies b. It commences when the policy is delivered c. It commences when the application is signed d. It applies only to term life insurance policies

b. It commences when the policy is delivered

A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums? a. The insured's premiums will be waived until she is 21 b. The premiums will become tax deductible until the insured's 18th birthday c. Since it is the policyowner, and not the insured, who has become disabled, the life insurance policy will not be affected d. The insured will have to pay premiums for 6 months. If at the end of this period the father is still disabled, the insured will be refunded the premiums

a. The insured's premiums will be waived until she is 21

Which of the following statements is TRUE concerning irrevocable beneficiaries? a. They can be changed only with the written consent of that beneficiary b. They may be changed at any time c. They can never be changed d. They may be changed only on the anniversary date of the policy

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

The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium after the policy has been in force for at least how many years a. 1 year b. 2 years c. 5 years d. 7 years

b. 2 years

What happens when a policy is surrendered for its cash value? a. The policy can be converted to term converage b. Coverage ends and the policy cannot be reinstated c. Coverage ends but the policy can be reinstated at any time d. The policy can be reinstated by paying back all policy loans and premiums

b. Coverage ends and the policy cannot be reinstated

An insured who had a life insurance policy for $1 million died. In filing the claim, his wife and children discovered that there was no beneficiary named on the policy. What will happen to the death benefit in this case? a. The insurer will retain the benefit b. It will go to the insured's estate c. It will be divided among his children d. It will be automatically paid to the insured's surviving family

b. It will go to the insured's estate

An insured purchased a life policy in 2010 and died in 2020. The insurance company discovers at that time that the insured had misstated information about her insurance history on the application. What will the insurer do? a. Sue for the right to not pay the death benefit b. Pay the death benefit c. Refuse to pay the death benefit because of the misstatement on the application d. Pay a decreased death benefit

b. Pay the death benefit