Part 3 Provision Option
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 death benefit
A man dies and is insured by a Whole Life insurance policy of $50,000 which has a cash value of $15,000. The primary beneficiary will receive how much?
50k
Which statement is TRUE in regards to a policy loan?
It is taxed as ordinary income
Which of these Nonforfeiture Options continue a build-up of cash value?
Reduced Paid-Up
Annuitization can be described as
converting a cash value into periodic income
A $50,000 Whole Life policy is surrendered by the policyowner for the full cash value amount of $15,000. The policyowner had paid a total of $10,000 in premiums while the policy was active. How much of the cash value is taxable?
$5,000
How long can an insurer legally defer paying the cash value of a surrendered life insurance policy?
6mos
Which of these is NOT a characteristic of a Straight Life annuity?
A beneficiary will receive a lump-sum benefit if the annuitant dies
Which of these is an accurate statement regarding a fixed period settlement option on a life insurance policy
A portion of the payments paid to the beneficiary comes from interest calculated on the proceeds of the policy
A policyowner who permanently changes the ownership of a life insurance policy is exercising which contractual option?
Absolute assignment
The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a
Accidental Death and Dismemberment rider (AD&D)
Which of these would NOT be a valid reason to add the waiver of premium rider to a life insurance policy?
Allows a policyowner to take out a policy loan to cover premium payments in the event of total disability
Which of the following is NOT a condition that must be met for an accidental death benefit to be paid?
Cause of death must be from a job-related injury
Which would be described as a beneficiary designation by class?
Children of the insured
N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?
Claim will be denied
T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive?
Correct. The mother receives $0 because T is still alive and the sole primary beneficiary, while the mother is still the contingent beneficiary.
Which of the following is NOT guaranteed in a whole life policy?
Dividend scale
Which assumption concerning a Fixed Dollar Life annuity is correct?
Insurer assumes the investment risk
All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death EXCEPT
Interest Only
Which of these statements is NOT true regarding a cash value loan against a life insurance policy?
Interest payments made by policyowner are deductible
hich of these pays an income to two or more annuitants until the death of the last annuitant?
Joint and survivor annuity
How much is normally paid to a policyowner in a life (viatical) settlement?
Less than the death benefit
A policyowner has a life insurance policy where she had listed her age on the application as 5 years younger than her actual age. If she dies and the insurer discovers the misstatement of age, how much will the insurance company pay?
Less than the face amount
What would be a valid reason for naming a trust as the beneficiary of a life insurance policy as opposed to naming an individual?
Management of proceeds would be provided
Which statement is true regarding a minor beneficiary?
Normally, a guardian is required to be appointed in the Beneficiary clause of the contract
Who assumes the investment risk in a Variable Life annuity?
Owner of the annuity
P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?
P will still receive declared dividends
A young, married teacher has two children and owns a Whole Life policy. If the teacher wants an increasing Death Benefit to protect against inflation, the teacher should select which of the following Dividend Options? *
Paid-Up Additional Insurance
Which statement most accurately describes a single premium whole life policy?
Paid-up policy that offers lifetime protection
A rider that is normally associated with a Juvenile Life policy is called a
Payor Benefit
What does a fixed life annuity offer protection against?
Savings depletion because of longevity
When does interest income in a deferred annuity get reported for federal income taxes?
When the distributions are received
Most employers will establish benefit schedules according to all of the following EXCEPT
age
When there is a named beneficiary on a life insurance policy, the death benefits
are paid directly to the beneficiary without interference from the insured's creditors
Additional coverage can be added to a Whole Life policy by adding a(n)
decreasing term rider
Death proceeds from a life insurance policy are typically included in a deceased insured's gross estate
for federal income tax reasons
During the early years of a whole life insurance policy, the cash value will normally be
less than the total premiums paid
A life insurance company's spendthrift clause would have no effect if the beneficiary is paid the proceeds as a
lump-sum payment
When an annuity is surrendered, who must sign the authorization to do so?
owner
An owner has a life annuity which provides benefit payments for a minimum time period, no matter when the annuitant dies. The feature of this annuity is called
period certain
An insured that has a guaranteed insurability rider attached to his life insurance policy has the right, without proving insurability, to
periodically purchase additional insurance
The annuitant in a single premium deferred annuity (SPDA)
receives deferred benefit payments
A level premium indicates
the premium is fixed for the entire duration of the contract
What type of policy can group term life insurance normally be converted to?
An individual permanent life insurance policy
How may an insurance company classify an accidental death benefit on a life policy?
As an optional policy rider
When a Permanent Life insurance policy's premiums are stopped, which provision is designed to keep the policy from lapsing?
Automatic Premium Loan
How are surrender charges deducted in a life policy with a rear-end loaded provision?
Deducted when the policy is discontinued
An insured covered by life insurance has just died. What will happen if the primary beneficiary had already died before the insured and contingent beneficiary?
Proceeds will go to the contingent beneficiary
A life insurance policyowner would like a dividend option that results in a limited current outlay of funds. Which dividend option would be chosen?
Reduction of premium payment
Which statement regarding the joint and survivor life insurance settlement option is INCORRECT?
The installment amounts are larger as compared to a single life income option
Which statement regarding a fixed period settlement option is correct?
The installment payment amount is determined by the total number of installments
What is considered the collateral on a life insurance policy loan?
The policy's cash value
What is the effect of the market value adjustment in a market value adjustment annuity?
Transfers some of the investment risk to the owner
Which of the following is an important underwriting principle of group life insurance?
Everyone must be covered in the group
D is the policyowner and insured for a $50,000 life insurance policy. The beneficiary is D's wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid to?
Ex-wife
T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary?
Request of the change will be refused
What is payable to a policyowner if a whole life policy is surrendered prior to its maturity date?
The cash value
What is the underlying concept regarding level premiums?
The early years are charged more than what is needed
