Chapter 4
P has a traditional participating whole life insurance policy with a death benefit of $100,000, $5,000 in dividend additions, and a $4,000 policy loan and loan interest. P reaches age 100. What is the amount the insurance company owes P? A $101,000 B $100,000 C $91,000 D $95,000
A $101,000
Paul is the insured and policyowner. Paul named Danny and Kayla as co-primary beneficiaries of Paul's $100,000 policy. Danny is to receive 70% and Kayla is to receive 30%, therefore Danny gets $________ and Kayla gets $______ when Paul dies. A $70,000/$30,000 B $60,000/$40,000 C $80,000/$20,000 D $50,000/$50,000
A $70,000/$30,000
A small business owner used her life insurance policy as collateral for a bank loan. The face amount of the whole life policy was $100,000 and the original amount of the loan was $20,000. If the outstanding loan balance at the time the small business owner died was $10,000, how much will the policy's named beneficiary receive? A $90,000 B $70,000 C $100,000 D $80,000
A $90,000
Individual life policies typically pay out a death benefit if death is a result of suicide after they have been in force for _____ years. A 2 B 4 C 5 D 6
A 2
Alice is the insured, Bill is the primary beneficiary, and Claire is the contingent beneficiary. Bill dies, then Claire dies, then Alice dies, so who receives the policy proceeds? A Alice's estate B Bill C The treasury of the state where Alice lives D Claire
A Alice's estate
Which of the following provisions is NOT a standard provision? A Backdating B Insuring Clause C Misstatement of Age D Entire Contract Clause
A Backdating
Which individual policy standard provision stipulates the conditions under which the insurer will not pay a claim while the policy was in force at the time of death of the insured? A Exclusions B Misstatement of Age or Gender C Consideration Clause D Free Look
A Exclusions
An insured has a $175,000 permanent life insurance policy and is having difficulty keeping up with the premium payments. Which Nonforfeiture Option would allow him to forego the premiums and retain the same face amount until the cash surrender value is exhausted? A Extended Term B Premium Reduction C Reduced Paid-Up D Cash Surrender
A Extended Term
hich of the following statements regarding life insurance policy exclusions is TRUE? A Generally, aviation is excluded, except for fare-paying passengers on a commercial flight B Hazardous occupations are usually covered at a reduced benefit if death is the result of an insured's occupation C The war clause states coverage is provided if death is the result of war D The status clause states that coverage is provided to individuals with military status
A Generally, aviation is excluded, except for fare-paying passengers on a commercial flight
All of the following must be included in a whole life policy, except: A Guaranteed dividend table B Extended term provision C Cash value accumulation D Surrender value
A Guaranteed dividend table
Ed purchased a policy naming his children as per capita beneficiaries. Upon his death the proceeds are paid to: A His surviving children, who will share the proceeds equally B All beneficiaries, with any deceased beneficiary's share passed to his/her heirs equally C His wife, then all children or their heirs D The estate of the insured, then passed down to the heirs
A His surviving children, who will share the proceeds equally
Which of the following identifies the parties to the contract and the perils it covers and the circumstances under which the insurer will pay a life insurance policy claim? A Insuring Clause B Consideration Clause C Entire Contract Clause D Exclusions Provision
A Insuring Clause
A beneficiary wants a guarantee that benefits will be paid for a period of 10 years or life whichever time period is greater. Which of the following options should the beneficiary select? A Life with 10-year Period Certain B Fixed Amount C Joint Life Income D 10-year Period Certain
A Life with 10-year Period Certain
What is the easiest and best way to assure that the life insurance policy's death proceeds don't end up in probate court process? A List a primary and contingent beneficiary by their full name and relationship to the insured B Name the estate as beneficiary C Ascertain that the client has a trust that is filed with the County court D Make sure the client has a will that is current and in an easily accessible location
A List a primary and contingent beneficiary by their full name and relationship to the insured
Beth owns a 20-Pay Life participating policy. She has decided that the dividends should be applied toward future premiums. Which Dividend Option did she choose? A Premium Reduction B Cash C Accumulate at Interest D Paid-Up Option
A Premium Reduction
_________ Options allow for the distribution of the life insurance death benefit, to the named beneficiary or contract owner, as the situation warrants. A Settlement B Dividend C Nonforfeiture D Accumulation
A Settlement
The provision which denies the beneficiary the right to commute, alienate, or assign his/her interest in the policy proceeds is: A The Spendthrift Clause B The Consideration Clause C The Common Disaster Clause D The Insuring Clause
A The Spendthrift Clause
When a life insurance policy's ownership is changed from the original owner to a new owner without payment, this is known as a(n) ___________. A Viatical settlement B Absolute assignment C Collateral assignment D Life settlement
B Absolute assignment
A policy is issued with a rider. Years later the policyowner would like to drop the rider in order to save some money. Who has the authority to effect that policy change? A The insured B An executive officer of the insurer C The beneficiary D The producer
B An executive officer of the insurer
or which of the following reasons may an insured return the policy for a full refund within the Free Look Period? A Death of the agent B Any reason C Increase in premium D Decline in financial rating of the insurance company
B Any reason
An insured with a participating life insurance policy receives an annual dividend check in the mail. He must have selected which Dividend Option: A Dividend reinvestment B Cash C Accumulate at interest D Premium reduction
B Cash
______________ are conditions stipulated in the contract for which the insurer will not provide coverage. A Exceptions B Exclusions C Hazards D Eliminations
B Exclusions
Which of the following correctly describes the effect of the Common Disaster Clause? A If the insured and primary beneficiary are killed in an auto accident in which both were in the car at the time of the crash, an autopsy will be required in order to determine which passenger died first B If an insured and primary beneficiary both are killed when the bus they are riding in goes over a cliff and if it cannot be determined who died first, the insured or primary beneficiary, the insured will be presumed to have survived the primary beneficiary so the contingent beneficiary will be able to receive the death proceeds C If an insured and contingent beneficiary both die in a train wreck, it is presumed that the insured died first in order to protect the primary beneficiary's right to claim the death benefit D If the primary and contingent beneficiary die when the boat they were sailing in sinks, it is presumed that the primary beneficiary outlived the contingent beneficiary for claims paying purposes
B If an insured and primary beneficiary both are killed when the bus they are riding in goes over a cliff and if it cannot be determined who died first, the insured or primary beneficiary, the insured will be presumed to have survived the primary beneficiary so the contingent beneficiary will be able to receive the death proceeds
The ______________ clause is the insurance company's promise to pay the policy's death benefit to the named beneficiary, after receiving due proof of death of the insured, as long as the policy is in force. A Consideration B Insuring C Incontestability D Entire Contract
B Insuring
Which of the following death benefit settlement options pays out a benefit that is 100% income tax-free to the recipient? A Fixed Amount B Lump Sum C Life Income Only D Fixed Period
B Lump Sum
All of the following are TRUE of Policy Loan Rate provisions, except: A Interest, if not paid when due, is added to the total debt B Policies with fixed interest loan rates have a maximum interest rate of 10% C Policies with adjustable loan interest rates have a maximum interest rate based upon Moody's corporate bond yield average D The policy loan amount cannot exceed the available cash value
B Policies with fixed interest loan rates have a maximum interest rate of 10%
The nonforfeiture option that provides coverage for the longest period of time is: A Extended Term B Reduced Paid-Up C Automatic Premium Loan D Cash surrender value
B Reduced Paid-Up
Which of the following terms means that the policyowner can change the beneficiary designation at any time and for any reason? A Irrevocable B Revocable C Per capita D Per stirpes
B Revocable
What is the primary purpose of the free look period? A It forces producers to deliver policies in person to resell the policy to reduce returns and early policy lapses B To allow the applicant time to reconsider their purchase decision and to see if the policy was issued as applied for C It is a way to offer a legal rebate, 10-30 days of 'free' insurance D It is a marketing strategy of major insurers to get applicants to sign up for a policy
B To allow the applicant time to reconsider their purchase decision and to see if the policy was issued as applied for
In a whole life policy, cash value must be made available to borrow against after _____ years. A 2 B 5 C 3 D 4
C 3
Life insurance benefits are usually paid ____________, unless another mode of settlement has been selected. A In specified amounts over time B In installments over a specified period of time C In a lump sum D Until the beneficiary dies
C In a lump sum
Which of the following beneficiary designations prevents a policyowner from assigning the policy, taking a policy loan, or surrendering the policy without the beneficiaries consent? A Named B Class C Irrevocable D Incontestable
C Irrevocable
Under what conditions can a producer alter, change, modify or waive any policy provisions? A With home office approval B With local agency management approval C Never D If the policyowner consents
C Never
Which of the following is TRUE regarding payment of premium? A Paying the premium monthly results in lower total overall cost than paying quarterly B Paying the premium semiannually results in greater total cost than paying quarterly C The more frequent the payment, the greater the overall cost D The more frequent the payment, the lower the cost
C The more frequent the payment, the greater the overall cost
An insured forgets to pay his insurance premium. Instead of the policy lapsing, the premium is paid by the company. This would suggest that a __________ policy was purchased. A Level term B Renewable term C Whole Life D Decreasing term
C Whole Life
_____________ is/are not considered material to the policy issuance. A Hazardous occupations and/or hobbies B 12 driving under the influence tickets within 6 months prior to application C Recent major inpatient hospital surgeries D Age and/or gender
D Age and/or gender
Alice finds she no longer is able to pay premiums on her $50,000 Whole Life Policy, but needs that amount of protection for her family. Which Nonforfeiture Option provides this protection? A Fixed Amount B Reduced Paid-Up C Paid-Up Option D Extended Term
D Extended Term
Taxation applies to any ________ on the cash value paid out as a withdrawal of a Universal Life policy. A Refund of premium B Capital gain C Dividend D Interest
D Interest
All of the following can determine the death benefit settlement option, except: A The policyowner prior to death B The beneficiary if no option was designated C The beneficiary if the policyowner directs the insurer to permit him or her to choose D The insurer
D The insurer
The insurer's consideration is __________ while the applicant's consideration is ________. A Issuing the policy / Submitting the application B Hiring and training a producer / Listening to the sales presentation C Providing claim forms / Submitting proof of death D Their promise to pay the claim / The amount and frequency of premiums paid
D Their promise to pay the claim / The amount and frequency of premiums paid