Chapter 5 practice test

What type of insurance would be used for a return of premium rider?

increasing term

What is the purpose of the 10-day free look privilege?

it permits the insured to return the policy for a full refund of premiums paid

The type of settlement option which pays throughtout the lifetimes of two or more beneficiaries is called

joint and survivor (pays while either beneficiary is still living)

Policy loan options are only found in what kind of policies?

policies that contain cash value

What is true about accumulation at interest option

1. the annual dividend is retained by the company 2. the interest is credited at a rate specified by the policy 3.The policyholder has the right to withdraw the accumulations at any time 4. Interest crediited is TAXABLE, whether or not the policyowner receives it

Dividend options (3)

1.accumulated at interest 2.reduction of premium 3.paid-up additions

Which nonforfeiture option has the highest amount of insurance protection?

extended term nonforfeiture (has the same face amount as the original policy, but for a shorter period of time)

When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option?

fixed amount

Nonforfeiture values guarantee which of the following for the policyowner?

That the cash value will not be lost

The two types of assignments are

Absolute and collateral ( absolute assigns the entire policy, collateral assigns a part or all of the benefits)

An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision?

Common disaster (law will assume that the primary beneficiary that dies first in a common disaster as long as the beneficiary dies within this specified period of time following the death of the insured (usually 30 day)

Which settlement option provides a single beneficiary with income for the rest of his/her life?

Single life option

An insured purchased a 15 year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from his injuries. What amount would his beneficiary receive as a settlement?

$200,000 (fatal injuries were caused by an accident and he died within the 90 day benefit llimit stipulated in most policies)

The accelerated benefits provision will provide for an early payment of the death benefit when the insured

becomes terminally ill

How long will the beneficiary receive payments under the single life settlement option?

until the beneficiary's death (The Single Life Option can provide a single beneficiary income for the rest of his/her life. Upon the death of the beneficiary, payments stop)

The insured under a 100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in his policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?

100,000 dlls (triple indemnity accidental death rider obligates the company to pay 3 times the face amount if the insured dies as a result of an accident. The death must be accidental and not contributed to by any other factors and must occur within 90 days of the accident. in this case the insured contributed to his own death, so the rider is void)

If a settlement option is not chosen by the policy owner or the beneficiary, what option will be used by the insurer?

lump sum (contract is designed to pay the proceeds in cash, called a lump sum, unless the recipent chooses an optional mode of settlement)

Methods used to pay the death benefits to a beneficiary upon the insured's death are called

settlement options

The sole beneficiary of a life insurance policy dies before the insured. If the policyowner fails to change the beneficiary before the insured's death, the proceeds will go to

the insured's estate

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?

the insured's premiums will be waived until she is 21 (if a parent/guardian becomes disabled for at least 6 months or dies, the insurer will waive the premium until the minor reaches a certain age, such as 21)

The Waiver of Cost of Insurance rider is found in what type of insurance

universal life policy

How long will the beneficiary recieve payments under the single life settlement option?

until the beneficiary's death

The life insurance policy that prevents an insurance company from denying payment of death claim after a specified period is known as

Incontestability clause (if an insurer wishes to contest any statements on an application, they must do so within the first two years)

the policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this?

Reduction of premium

What is the waiting period on a Waiver of Premium rider in life insurance policies?

6 months (most insurers impose a 6month waiting period from the time of disability until the first premium is waived

What type of beneficiary would NOT be able to receive the death benefit directly from the insurer in the event of the insured's death?

a minor; does not have the legal capacity to release the insurer from further obligation, benefits normally have to be passed through a guardian or trustee

What best describes fixed-period settlement option

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

What is unique about children's riders added to an insured's permanent life insurance policy?

it is term coverage that is convertibile to permanent insurance at or prior to the child reaching the max coverage age

Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member?

family term rider

During partial withdrawal from a universal life policy, which portion will be taxed?

interest

What is true regarding the guaranteed insurability rider

1. the insured may purchase additional coverage at the attained age 2. the insured may purchase additional insurance up to the amount specified in the base policy 3. It allows the insured purchase additional amounts of insurance without proving insurability only at specifies dates or events (this rider usually expires at the insured's age 40)

A business owner was trying to obtain a bank loan to fund the purchase of a new business facility, but the bank required proof of additional assets to secure the loan. The business owner then decided to use her $250,000 life insurance policy to secure the loan. Which provision makes this possible?

Collateral assignment

After a back injury, an insured is disabled for a year. His insurance policy carries a Disabiiity Income Benefit rider. Which of the following benefits will he receive?

Monthly premium waiver and monthly income

If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a

guaranteed insurability rider

If an insured withdraws a portion of the face amount in the form of accerlated benefits because of a terminal illness, how will that affect the payable death benefit of the policy?

the death benefit will be smaller

An individual purchased a life insurance policy on his life naming his wife and primary beneficiary and their daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?

if the primary beneficiary predeceases the insured