Life Insurance Exam Part 2

The disability income rider usually a. Pays for any injury b. Includes the waver of premium rider c. Is always included in a whole life policy d. Does not require an extra premium

b. Includes the waver of premium rider

Any extra premium charged for the waiver of premium rider a. Applies to the policy's cash value b. Does not apply to the policy's cash value c. Must be paid on a monthly basis d. Earns interest, as with all other types of premium

b. Does not apply to the policies cash value

Once a policy has lapsed, the insured usually can reinstate the policy, provided proof of insurability is shown, if a. All back premiums do plus interest have been repaid and less than 3 years have elapsed b. All back premiums to do have been repaid and less than 4 years have elapsed c. All back premiums do plus interest have been repaid and less than one years have elapsed d. All back premiums do have been repaid regardless of how much time has elapsed

a. All back premiums do plus interest have been repaid and less than 3 years have elapsed

Turning over all rights in a life policy to an assignee is referred to as a. An absolute assignment b. A collateral assignment c. An irrevocable beneficiary d. A policy exclusion

a. An absolute assignment

If an insurance policy includes the waiver of premium rider, what happens when the age is reached where the rider no longer applies? a. The premium for the policy is reduced b. The insured continues to pay the same premium c. All amounts applicable to the premium for the provision are refunded d. All amounts applicable to the premium for the provision are transferred to cash values

a. The premium for the policy is reduced

When either the fixed period or fixed amount settlement option is selected, the a. Total amount paid over the years will be greater than the face amount of the policy b. Total amount paid over the years will be smaller than the face amount of the policy c. Company will not guarantee payment of the full face amount d. Total amount paid over the years will be exactly the same as the face amount of the policy

a. Total amount paid over the years will be greater than the face amount of the policy

The settlement option that provides for the proceeds plus interest to be paid in installments for a specified period of time is the a. fixed period option b. fixed amount option c. life income option d. interest option

a. fixed period option

The premium that reflects mortality rates, assumed interest in the policy's share of the company's operating expenses is called the a. gross premium b. earned premium c. standard premium d. net premium

a. gross premium

With regard to the waiver of premium rider, after the disability of policy owner and normally a. Must repay the premiums paid by the company during disability b. Need not repay the premiums paid by the company during disability c. Would be charged a higher premium d. Must take out a new policy

b. Need not repay the premiums paid by the company during disability

The non forfeiture option that provides the most life insurance is the a. Cash surrender value option b. Reduced paid up insurance option c. Extended term option d. Interest option

c. Extended term option

The main purpose of the spendthrift clause contained in a settlement option is to prevent the beneficiary from doing all of the following EXCEPT a. Transferring the proceeds of the policy b. Commuting the proceeds of the policy c. Is encumbering the proceeds of the policy d. Spending any of the money for a designated period of time

d. Spending any of the money for a designated period of time

An insured to allows a permanent policy to lapse. Unless otherwise instructed, the insurance company a. Is entitled to keep any accumulated cash values b. May use the cash value to purchase a reduced amount of permanent insurance c. Will automatically send the cash values of the policy to the policy owner d. Will automatically institute the extended term option

d. Will automatically institute the extended term option

The substantial option under which the principal never decreases unless the beneficiary withdrawals is the a. Interest option b. Fixed period option c. Fixed amount option d. Life income option

a. Interest option

Money provided under the automatic premium loan provision a. Is generally charged interest b. Need not be repaid to maintain a maximum cash value c. Is included in all permanent policies d. Is included only in term policies

a. Is generally charged interest

The extended term non forfeiture option provides a. Paid up term coverage equals to that of the original policy b. Reduced term coverage based on the accumulated cash value of the original policy c. Term coverage based on the amount of premium the insured is able to pay d. Term coverage = that of the original policy with premiums based on the insured's attained age

a. Is paid up term coverage equal to that of the original policy

Using the policy dividends as a single premium to buy additional life insurance is called the a. Paid-up additions option b. Reduce premiums option c. Cash payment option d. Accumulation at interest option

a. Paid-up additions option

The payment of the proceeds of a policy in other than a lump-sum cash payment is called a a. Settlement option b. Nonforfeiture value c. Dividend d. Facility of payment

a. Settlement option

When a reduced paid-up policy is purchased a. The amount of protection will not vary during the life of the new policy b. The policy owner's future premiums will be smaller than the old policies premiums c. The premium is computed at the insured's original age d. The policy owner must bear a greater share of the insurance company's operating expenses

a. The amount of protection will not vary during the life of the new policy

Amounts paid out under the accelerated benefits rider a. Must be repaid with interest b. Are deducted from the policies death benefit c. Can be used for any purpose d. Are authorized only in the case of double indemnity

b. Are deducted from the policy's death benefit

With regard to life insurance policies, loading refers to a. Assignment of the appropriate share of the company's mortality rate to each policy b. Assignment of the appropriate share of the company's operating expenses to each policy c. The amount the company must keep on hand to meet its policy obligations d. Total amount paid over the years will be exactly the same as the face amount of the policy

b. Assignment of the appropriate share of the company's operating expenses to each policy

If the policy owner has chosen the reduced premium dividend option, dividends will a. Be used purchase additional insurance at a reduced rate b. Be applied to the premium due c. Be used to purchase term insurance with a reduced face value d. Result in the policy's face value being reduced

b. Be applied to the premium due

If a policy lapses, the company a. Will automatically reinstate the accidental death benefit if the original policy contained that provision b. Can refuse to reinstate the accidental death benefit c. Usually includes the accidental death benefit, even if the provision was not previously included d. Cannot refuse to reinstate the accidental death benefit if requested to do so by the policy owner

b. Can refuse to reinstate the accidental death benefit

The type of rider that generally is reduced to zero face amount is called a a. Level term rider b. Decreasing term rider c. Family income rider d. Commuted value rider

b. Decreasing term rider

A policy owner allows a policy to lapse and the insurance company converts the policy to the extended term option. Which of the following from the original policy will automatically carry over into the new policy? a. Waiver of premium b. Face value c. Accidental death benefit d. Disability income

b. Face value

A policy that shares in the company's excess funds or divisible surplus is called the a. Permanent policy b. Participating policy c. Nonparticipating policy d. Term policy

b. Participating policy

If one of the name beneficiaries has died, and the deceased beneficiary's heirs receive a portion of the proceeds of the policy, this is called a a. Per capita beneficiary designation b. Per stirpes beneficiary designation c. Conditional beneficiary designation d. Open beneficiary designation

b. Per stirpes beneficiary designation

Each of the following statements about policy loans is correct EXCEPT a. The loan value of the policy cannot exceed the current cash value b. Policy loans can be made with both permanent and term policies c. If a policy has cash value, the insurance company cannot refuse to lend the policy owner money d. The policy loan cannot be made on a policy until it has been enforced long enough to accumulate some cash value

b. Policy loans can be made with both permanent and term policies

Theresa begins receiving monthly checks after her husband's death.. A year later Theresa passes away and her daughter receives monthly checks until the proceeds are exhausted. They're exhausted. This settlement option is the a. Straight life income option b. Refund annuity option c. Life income certain option d. Joint and survivor life income options

b. Refund annuity option

Which of the following provides the basis for the benefit amount paid to an insured under a disability income rider? a. The amount of the premium being paid b. The face amount of the policy c. The severity of the injury or illness d. All of these are factors

b. The face amount of the policy

Usually, once a policy has been in force over 2 years, the company can a. Void the policy for any reason b. Void the policy only for non payment of the premium c. Change the policy owner's schedule of premium payments and payment as it so desires d. Request a physical examination of the insured

b. Void the policy only for non payment of the premium

The term "nonforfeiture values" refers to the fact that a. When a policy owner stops paying premiums on a limited pay policy, he or she is entitled to receive its face amount in cash b. When a policy owner stops paying premiums on a payment policy, it's cash value accumulation or equivalent must be available to the policy owner c. When a term policy expires, the policy owner need not forfeit the protection and may purchase permanent insurance for the same amount as the term policy within 30 days d. When a policy owner stops paying premiums on a permanent policy, all premiums previously paid may be returned by the insurance company upon application

b. When a policy owner stops paying premiums on a permanent policy, it's cash value accumulation or equivalent must be available to the policy owner

With which of the following may a 20-year term rider be combined? a. A 20-pay life policy b. A 20-pay term policy c. A 30-pay life policy d. A 30-pay term policy

c. A 30-pay life policy

With a modified premium whole life contract, premium payments a. Are the same for the life of the contract b. Are higher in the early years of the contract c. Are lower in the early years of the contract d. During the life of the contract are variable according to the policy owner's ability to pay

c. Are lower in the early years of the contract

Dividends left to accumulate at interest a. Will reduce the policy's cash value, if withdrawn b. Result in the interest being tax free c. Can be withdrawn without affecting the cash value of the policy d. Can only be withdrawn when the policy proceeds are paid

c. Can be withdrawn without affecting the cash value of the policy

The increasing term rider is usually used to a. Guarantee that the policy owner will receive either the cash values or the amount of premiums paid when the insured dies and the beneficiary receives the death proceeds b. Provide for payment of premiums in the event the policy is in a grace period When the insured dies c. Guarantee that the beneficiary will receive either the cash values or the amount of premiums paid in addition to the policy death proceeds d. Provide that the amount of premiums paid will be added to cash values when the whole life policy is surrendered at retirement

c. Guarantee that the beneficiary will receive either the cash values or the amount of premiums paid in addition to the policy death proceeds

A participating policy is likely to have which of the following? a. A high face value b. A lower premium than a nonparticipating policy c. A higher premium than a nonparticipating policy d. A front-end load

c. Is a higher premium than a nonparticipating policy

The factors that determine the amount of each payment under the fixed period settlement option are a. Length of the fixed period and face amount of the policy b. Length of the fixed period, face amount of the policy, and age of the beneficiary c. Length of the fixed period, face amount of the policy, and interest d. Length of the fixed period , face amount of the policy, interest, age of the beneficiary

c. Length of the fixed period, face amount of the policy, and interest

The phrase "1980 Commission Standard Ordinary Table" refers to the a. Table used by insurance companies to determine dividend amounts b. Rate table which companies must use to determine the premium to be charged c. Mortality table used by companies to calculate reserve requirements d. Is a special type of ordinary life insurance policy authorized in 1980 by some insurance commissioners

c. Mortality table used by companies to calculate reserve requirement

Each of the following is a factor in computing the premium for a life insurance policy EXCEPT a. The mortality rate b. Investment experience c. Number of anticipated policy owners d. Operating expenses

c. Number of anticipated policy owners

In order to encourage the owner of a decreasing term rider to continue the ride for the entire policy period, a company might a. Allow the policy owner to pay premiums on the rider for a longer period b. Reduce the rider premium during the later years of the rider c. Reduce the number of years during which premiums are paid on the rider d. Decrease the face amount of the rider more slowly

c. Reduce the number of years during which premiums are paid on the rider

Under the provisions of the fixed period sttlement option, the a. Principal amount is never decreased b. Interest on the principal amount is paid to the beneficiary c. The principal amount gradually reduces to zero d. Principal amount is invested by the insurance company, with interest being paid to the policy owner

c. The principal amount gradually reduces to zero

A lapsed policy may usually be reinstated a. Within 30 days after the grace period expires b. Within one year after the policy lapse c. Within 3 years after the policy lapses d. At any time provided the insured pays all back premiums plus interest and proves insurability

c. Within 3 years after the policy lapses

A payer rider is used to keep what type of policy and force? a. Any term policy b. A whole life policy c. Any permanent policy d. A juvenile insurance policy

d. A juvenile insurance policy

If an insured currently has a policy with a waiver of premium rider and should change to a more hazardous occupation, the insurance company will a. Void the policy b. Increase the premium c. Cancel the waver of premium rider d. Continue the waiver of premium rider

d. Continue the waver of premium rider

The portion of the premium that is based only on mortality rates and assumed interest is called the a. Gross premium b. Earned premium c. Standard premium d. Net premium

d. Net premium

If Greg's policy on his own life has a guaranteed insurability rider, it means that he can purchase more insurance a. At any time during his life, on his own life, without proof of intruability b. On the lives of his dependence at certain specified ages c. On his own life at certain specified ages provided he is insurable d. On his own life at certain specified ages without proof of insurability

d. On his own life at certain specified ages without proof of insurability

During its effective period, the face amount of a level term rider a. Gradually increases until it equals the amount of the permanent policy with which it is combined b. Gradually decreases until it equals the amount of the permanent policy with which it is combined c. Gradually decreases to zero d. Remains the same

d. Remains the same

The cash value of a permanent life insurance policy can be used for all of the following EXCEPT a. nonforfeiture options b. policy loans c. cash withdraws d. dividends

d. dividends