Chapter 5 individual life insurance contract, provisions, and options quiz

An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy?

$50,000

According to the Entire Contract provision, a policy must contain

A copy of the original application for insurance

Which of the following is TRUE about a class designation?

Beneficiaries are not identified by name

Which of the following best describes fixed-period settlement option?

Both the principal and interest will be liquidated over a selected period of time.

An insured pays an annual premium to his insurer. In return, the insurer promises to pay benefits in accordance with the terms of the contract. This is called

Consideration. "Consideration" is the value offered by the insured to the insurer, and vice versa. The insured makes accurate statements in the application and remits premium payments. In exchange, the insurer provides benefits as stipulated in the contract.

Using a class designation for beneficiaries means

Naming beneficiaries as a group

An insured purchased a life policy in 2010 and died in 2020. The insurance company discovers at that time that the insured had misstated information about her insurance history on the application. What will the insurer do?

Pay the death benefit

An insured misstates her age at the time the life insurance application is taken. This misstatement may result in

adjustment in the amount of death benefit

The automatic premium loan provision is activated at the end of the

grace period

Which of the following is true regarding a single life settlement option?

it provides income the beneficiary cannot outlive

An insured stops making payments on a loan taken from his cash value policy. What will most likely happen?

The policy will terminate when the loan amount with interest equals or exceeds the cash value.