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How do life insurance companies handle cases where the insured commits suicide within the contract's stated Contestable period?
"Claims are denied under the Suicide clause of the policy". Claims are denied under the Suicide clause of the policy.
A 42-year-old executive wants to purchase life insurance that will allow for increases or decreases to coverage as his/her needs change. Which of the following policies will best meet this need?
"Universal Life". Universal life insurance is characterized by flexible premiums and an adjustable death benefit.
L takes out a life insurance policy and dies 10 years later. During the claim process, the insurer discovers that L had understated her age on the application. Under the Misstatement of Age provision, the insurer will:
"adjust the death benefit to a reduced amount". In this situation, the Misstatement of Age provision in the policy specifies that the insurance proceeds will be adjusted to a reduced amount.
When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n):
"an exclusion". Exclusions are features of a life insurance policy stating that the policy will not cover certain risks.
A 15-year mortgage is best protected by what kind of life policy?
. A 15-year mortgage is best protected by a 15-year decreasing term policy.
What type of policy would offer a 40-year old the quickest accumulation of cash value?
20-pay Life". In this situation, a 20-pay life policy offers the quickest accumulation of cash value.
A Renewable Term Policy is renewable at the option of the:
A Renewable Term Policy is renewable at the option of the insured.
Which life insurance rider typically appears on a Juvenile life insurance policy?
A payor benefit rider provides for waiver of premium if the adult-payor of the policy dies or becomes totally disabled.
When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?
An insurer may void the policy only if the misrepresentation is discovered during the Contestable period and proven to be material.
S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level or risk. Which product would S be advised to purchase?
Equity index insurance yields greater gains than bonds but will still protect the principal with a minimum of risk.
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?
In this situation, the statement "20-Pay Life accumulates cash value faster than Straight Life" would be correct.
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called:
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called Limited Pay Life.
Which rider provides coverage for a child under a parent's life insurance policy?
One of the best methods of adding coverage for a child on a parent's life insurance policy is to add a child term rider.
T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this?
Renewable Term policies guarantee the insured the right to continue term coverage after expiration of the initial policy period.
The Consideration clause in a life insurance policy indicates that a policyowner's consideration consists of a completed application and
The Consideration clause states that the policyowner's consideration consists of a completed application and the first initial premium.
When is the face amount of a Whole Life policy paid?
The face amount of a Whole Life policy will be paid when the insured dies or on maturity of the policy, whichever occurs first.
In a life insurance policy, which feature states that the policy will not cover certain risks?
The feature of a life insurance policy stating that the policy will not cover certain risks is called an exclusion.
S is covered by a whole life policy. Which insurance product can cover his children?
The means of providing life insurance on the children of a person who is covered by a life insurance policy is by a child term rider.
The automatic premium loan provision is designed to:
The purpose of the automatic premium loan is to keep the policy from lapsing.
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
Variable Universal Life is comprised of monthly mortality charges and self directed investment choices.
When a life insurance policy exceeds certain IRS table values, the result would create which of the following?
When a life insurance policy exceeds certain IRS table values, the result would create a Modified Endowment Contract (MEC).
What kind of premium does a Whole Life policy have?
Whole Life insurance policy has a level premium.
Which statement is correct regarding the premium payment schedule for whole life policies?
With whole life insurance, premiums are payable throughout the insured's lifetime, and coverage continues until the insured's death.
K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?
a Modified Whole Life policy.
T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase?
a Ten-Year Endowment should be purchased to ensure the funds will be available when needed.
Which of these provisions require proof of insurability after a policy has lapsed?
. Most insurers require evidence of insurability be provided upon reinstatement of a lapsed policy.
A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the:
A policy loan will pay the policyowner an amount that, with interest, does NOT exceed the guaranteed cash value.
What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?
Convertible Term provides temporary coverage that may be changed to permanent coverage without evidence of insurability.
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
Universal Life is designed to provide flexible premiums and an adjustable death benefit.
Credit life insurance is typically issued with which of the following types of coverage?
"Decreasing Term". The type of insurance used for Credit life is typically decreasing term, with the term matched to the length of the loan period.
What type of life policy covers two people and pays upon the death of the last insured?
"Survivorship". A survivorship life policy insures two individuals and is designed to pay a benefit upon the second death.
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
The Automatic Premium Loan provision can be incorporated into all of these policies EXCEPT decreasing term.
How are surrender charges deducted in a life policy with a rear-end loaded provision?
"Deducted when the policy is discontinued". In a policy with a rear-end loaded provision, surrender charges are deducted when the policy is discontinued.
Which of the following actions require a policyowner to provide proof of insurability in an Adjustable Life policy?
All of these actions can be taken by a policyowner without proof of insurability except for increasing the face amount.
P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount?
An AD&D clause provides benefits for death due to an accident or for the loss of one or more hands, feet, arms, legs, or loss of sight.
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?
If the insured dies before the endowment's maturity, the policy's face value — also known as the "death benefit" — is paid in a lump sum to any beneficiaries.
M purchases a $70,000 Life Insurance Policy with premium payments of $550 a year for the first 5 years. At the beginning of the sixth year, the premium will increase to $800 per year but will remain level thereafter. The face amount will remain at $70,000 throughout the life of the policy. The type of policy that M has purchased is:
Modified whole life policies are distinguished by premiums that are lower than typical whole life premiums during the first few years (usually five) and then higher than typical thereafter.
S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?
The Automatic Policy Loan provision will keep a Whole Life policy in force if a required premium payment is not made and there is sufficient cash value.
J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value?
The shorter the pay period, the faster the cash value growth 20-pay Life
Which of the following Dividend options results in taxable income to the policyowner?
While policy dividends are not taxable, any interest paid on them is taxable income in the year the interest is credited to the policy.
What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?
Whole life insurance is designed to mature at age 100.
If X wants to buy $50,000 worth of permanent protection on his/her spouse and $25,000 worth of 10-year Term coverage on X under the same policy, the applicant should purchase:
a Whole Life Policy with an Other Insured Rider.
A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?
"Payor provision". A payor provision provides that in the event of death or disability of the adult premium payor, the premiums on a juvenile policy will be waived until the insured child reaches a specified age or the maturity date of the contract.
When applied to Whole Life insurance, the word "straight" denotes:
"The duration of premium payments". The word "straight" denotes the duration of premium payments, usually for the rest of the owner's life.
Which of the following types of policies BEST identifies one in which the cash value may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors?
"Universal Life". A Universal Life policy has a cash value that may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors.
A Return of Premium life insurance policy is:
"Whole life and Increasing term". A Return of Premium life insurance policy is whole life insurance with a death benefit rider of increasing term insurance equal to the amount of premiums paid. If the insured dies within the period of term, the beneficiary will receive face amount plus the value of all paid premiums.
What action will an insurer take if an interest payment on a policy loan is not made on time?
"automatically add the amount of interest due to the loan balance". Unpaid interest from a policy loan is added to the loan balance if not paid by the due date.
All of these are characteristics of an Adjustable Life policy, EXCEPT:
"face amount can be adjusted using policy dividends". An insured may make all of these actions with an adjustable life policy EXCEPT "face amount can be adjusted using policy dividends".
Variable Life products require a producer to
"hold a Life Insurance license and a Securities license". Variable Life products require a producer to hold a Life Insurance license and a Securities license.
The amount of coverage on a group credit life policy is limited to:
"the insured's total loan value". With a group credit life policy, the amount of insurance on the life of a debtor is limited to the total amount of the insured's loan.
How does a typical Variable Life Policy investment account grow?
A Variable Life Policy has investment values based instruments such as mutual funds, stocks, and bonds.
B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of
A guaranteed insurability option in a Whole Life Policy permits the policyowner to purchase, without evidence of insurability, stated amounts of Whole Life insurance at specified times.
Whose life is covered on a life insurance policy that contains a payor benefit clause?
A payor benefit clause is generally added to a life policy that insures the life of a juvenile. It provides continuance of insurance coverage in the event of the death or total disability of the individual responsible for the payment of premiums.
What type of insurance offers permanent life coverage with premiums that are payable for life?
A policy that provides permanent life insurance with premiums payable for life is called Whole Life.
Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan?
A policyowner using the Life Insurance policy as collateral for a bank loan normally would make a collateral assignment.
Q would like to purchase $100,000 of permanent protection on his wife and $50,000 of Term coverage on himself under the same policy. What kind of policy should Q purchase?
"A Whole life policy with other insured rider". In this situation, a whole life policy with an other insured rider would be appropriate.
G purchased a Family Income policy at age 40. The policy has a 20-year rider period. If G were to die at age 50, how long would G's family receive an income?
In this situation, the family would receive an income from the policy for 10 years. Family Income policies pay an income beginning at the insured's death and continues for a period specified from the date of policy issue.
M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?
In this situation, the insurer would pay the death benefit less the past-due premium because death occurred within the grace period.
Which statement is TRUE in regards to a policy loan?
Interest on a loan which is not paid when due is added to the total debt.
All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death, EXCEPT:
The Interest Only option does NOT involve the systematic liquidation of the death proceeds.
A long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following?
"Inability of the insured to perform more than 2 Activities of Daily Living (ADL's)". A long-term care rider in a life insurance policy may trigger a benefit in the event of the inability of the insured to perform more than 2 Activities of Daily Living (ADL's).
The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called a(n):
"Insuring Agreement". The insuring clause or provision sets forth the company's basic promise to pay benefits upon the insured's death.
In a Life insurance contract, an insurance company's promise to pay stated benefits is called the:
"Insuring clause". The insuring clause in a Life insurance contract establishes the basic promise of the insurance company.
Which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE?
"It is taxed as ordinary income". Accumulated interest earned on dividends from an insurance policy is taxed as ordinary income.
Which of the following combination plans is designed to protect an insured from an unpaid mortgage balance upon premature death?
"Joint Life". A joint life policy covers two or more people. Using some type of permanent insurance (as opposed to term), it pays the death benefit at the first insured's death.
Which of these are NOT an example of a Nonforfeiture option?
"Life Income". All of these are examples of Nonforfeiture options EXCEPT Life Income.
Which type of policy is considered to be overfunded, as stated by IRS guidelines?
"Modified Endowment Contract". A policy that is overfunded to where it does not meet the 7-pay test is considered a Modified Endowment Contract.
Which of the following statements is CORRECT about accelerated death benefits?
"Must have a terminal illness to qualify". Accelerated death benefits provide for the early payment of some portion of the policy face amount should the insured suffer from a terminal illness or injury.
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". Even though premiums are waived because of the disability, the insured will continue to receive dividends just as if the insured were still making the payments themselves.