Life Policy Provisions, Riders, and Options

Which of the following is TRUE about the 10-day free-loo period in a life insurance policy? A) It applies only to term life. B) It is optional on all life insurance policies. C) It begins when the policy is delivered. D) It begins when the application is signed.

C

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? A) Fixed amount B) Fixed period C) Interest only D) Life income

C

After a DIY home-repair accident rendering someone disabled for a year, what benefits will he receive if his policy carries a Disability Income Benefit rider? 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

Children's riders attached to whole life policies are usually issued as what type of insurance? A) Increasing term B) Adjustable life C) Whole life D) Term

D

If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back? A) The policy beneficiary receives the full death benefit. B) The policy beneficiary takes over the loan payments. C) The policy is rendered null and void. D) The balance of the loan will be taken out of the death benefit.

D

A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the A) revocable beneficiary B) secondary beneficiary C) primary beneficiary D) irrevocable beneficiary

A

If a settlement option is not chosen by the beneficiary or policyowner, which option will be used? A) Life income B) Fixed period C) Fixed amount D) Lump sum

D

In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to A) the insured's spouse B) the policyowner C) the insurance company D) the contingent beneficiary

D

What is the benefit of choosing extended term as a nonforfeiture option? A) It can be converted to a fixed annuity? B) It has the highest amount of insurance protection. C) It matures at age 100. D) It allows for coverage to continue beyond maturity date.

B

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 policy will not be affected. D) The insured will have to pay premiums for 6 months. If the father is still disabled at that time, the insured will be refunded the premiums.

A

Which of the following named beneficiaries would not be able to receive the death benefit directly from the insurer in the vent of the insured's death? A) The former wife of the deceased insured B) A minor son of the insured C) A business partner of the insured D) The wife of the insured

B

What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident? A) Settlement clause B) Nonforfeiture clause C) Common disaster clause D) Spendthrift clause

C

An insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use? A) Paid-up option B) One year term C) Reduction of premium D) Accumulation of interest

A

Sam applied for a life insurance policy on January 10. The policy was issued on January 31. Sam's agent was on vacation at the time the policy was issued, so Sam didn't receive the policy until February 18. Sam decides that he does not want the policy. When would Sam need to return the policy to the insurer in order to receive a full refund? A) Any time because the agent didn't delivery the policy promptly. B) February 28, or 10 days after the policy is delivered. C) The time varies from one policy to another. D) It was already too late when Sam received the policy because the 10-day free-look period had expired.

B

When the policyowner specifies a dollar amount in which installments are to be paid, (s)he has chosen which settlement option? A) Fixed period B) Life income period certain C) Extended term D) Fixed amount

D

Under which of the following circumstances would an insurer pay accelerated benefits? A) An insured is looking for a way to put her daughter through college. B) A couple wants to build a house and would like to make a larger down payment. C) An insured is diagnosed with cancer and needs help paying for her medical treatment. D) A couple is nearing retirement and needs a steady stream of income.

C

An insured purchased a life insurance policy of 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) The primary and contingent beneficiaries share death benefits equally. B) With the primary beneficiary's written consent. C) If the insured died from accidental means. D) If the primary beneficiary predeceases the insured.

D

All of the following are nonforfeiture options except A) reduced paid-up B) interest only C) cash surrender D) extended term

B

The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose? A) Fixed amount option B) Interest only option C) Life income with period certain D) Joint and survivor

B

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries? A) The beneficiary will receive 2/3 of the total benefit with the final 1/3 payable when the first beneficiary dies. B) One of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies. C) The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive. D) The beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid over time.

C

Which of the following determines the length of time that benefits will be received under the Fixed Amount settlement option? A) length of income period B) amount of interest C) size of each installment D) predetermined length of time stated in the contract

C

What type of insurance would be used for a Return of Premium rider? A) level term B) decreasing term C) annually renewable term D) increasing term

D

A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change? A) Value adjustment rider B) Return of premium rider C) Inflation rider D) Cost of living rider

D

The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called A) joint and survivor B) fixed period C) fixed amount D) joint life

A

An insured purchased a policy in 2008 and died in 2013. The insurance company discovers at that time that the insured concealed information during the application process. What can they 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 fraud. D) Pay a decreased death benefit.

B

If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select? A) Interest only B) Fixed period C) Life with period certain D) Fixed amount

B

Which two terms are associated directly with the premium? A) Term or permanent B) Renewable or convertible C) Level or flexible D) Fixed or variable

C

Which of the following factors determines the amount of each installment paid in a Life Income Option arrangement? A) Projected life insurance and health insurance B) Recipient's life expectancy and amount of principal C) Projected income D) Recipient's health and death benefits

B

Which of the following information will be stated in the consideration clause of a life insurance policy? A) The conditions for insurability B) The amount of premium payment C) The parties to the contract D) The time period allowed for the payment of premium

B