Life Insurance Policy Provisions

What action can a policyowner take if an application for a bank loan requires collateral? Borrow against policy cash value and use as a down payment Utilize accelerated benefits provision Name bank as beneficiary Assign policy ownership to the bank

Assign policy ownership to the bank

Which of the following is an example of a nonforfeiture option? Conversion option Reduced Paid-Up option Guaranteed insurability option Inflation option

Reduced Paid-Up option

J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions? Automatic Premium Loan provision Payor clause Waiver of Premium Reinstatement provision

Reinstatement provision

Dividends paid from a life insurance policy are issued by the insurer taxable guaranteed issued by the Department of Insurance

issued by the insurer

P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount? Accidental Death and Dismemberment clause Entire Contract Accelerated Benefits provision Consideration clause

Accidental Death and Dismemberment clause

Which statement is TRUE in regards to a policy loan? A. Insurance companies can charge an interest rate based on the policyowner's credit report B. Past-due interest on a policy loan is added to the total debt C. Insurance companies can send delinquent interest accounts to a collection agency D. Past-due interest payments not paid after 3 months will void the policy

B. Past-due interest on a policy loan is added to the total debt

A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct? A. Cash value accumulation of both 20-Pay Life and Straight Life depend on the insurer's financial rating B. 20-Pay Life and Straight Life accumulate cash value at the same rate C. 20-Pay Life accumulates cash value faster than Straight Life D.Straight life accumulates faster than Limited-pay Life

C. 20-Pay Life and Straight Life accumulate cash value at the same rate

K's whole life insurance policy lapsed two months ago due to nonpayment. She would now like to reinstate the policy. All of these statements are correct about the policy's reinstatement EXCEPT A. K must reinstate within a stated period B. K must provide evidence of insurability C. K must pay back interest and premiums D. K will forfeit the right to use the automatic loan provision upon reinstatement

D. K will forfeit the right to use the automatic loan provision upon reinstatement

How are surrender charges deducted in a life policy with a rear-end loaded provision? Deducted when assigned to another policyowner Deducted when the policy is discontinued Deducted from the death benefit Deducted from policy's cash value

Deducted when the policy is discontinued

In a life insurance policy, which feature states that the policy will not cover certain risks? Exclusion Ejection Exception Expulsion

Exclusion

In a Life insurance contract, an insurance company's promise to pay stated benefits is called the: Entire Contract Owner's rights Consideration clause Insuring clause

Insuring clause

B receives yearly dividends and interest from a participating life insurance policy. Which of these should B include as gross income for federal income tax purposes? Interest and dividends Interest only Neither interest nor dividends are taxable Dividends only

Interest only

Which of these are NOT an example of a Nonforfeiture option? Reduced Paid-up Life Income Cash Surrender Extended Term

Life Income

K owns a Whole Life policy. If K wants an increasing Death Benefit to protect against inflation, which Dividend Option should she chose? Accumulate with Interest Paid-Up Additional Insurance Reduced Premiums Cash Option

Paid-Up Additional Insurance

A(n) _____ rider may be used to include coverage for children under their parents' life insurance policy. Term Payor Conversion Parent

Term

Which of these life insurance riders allows the applicant to have excess coverage? Waiver of Premium rider Term rider Automatic Premium Loan rider Guarantee Insurability rider

Term rider

A Life insurance policyowner would like to take out a policy loan against the cash value in his Whole Life policy. The interest rate applied to this loan may vary over time. This is referred to as a(n) ________ rate loan. Fixed Variable Increasing Fluctuating

Variable

A Cost of Living rider gives the insured decreasing premiums additional death benefits monthly income tax incentives

additional death benefits

The __________ has the right to change a life insurance policy's beneficiary. insured insurer policyowner beneficiary

policy owner

The advantage of reinstating an original life policy is a new incontestable period will begin the interest charged on policy loans will be lowered the premiums are based on a younger age the premiums are based on the current age of the insured

the premiums are based on a younger age