Life Insurance Policy Provisions, Riders, and Options
An insured receives an annual life insurance dividend check. What term best describes this arrangement? A Cash option B Reduction of Premium C Annual Dividend Provision D Accumulation at Interest
A Cash option
If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select? A Fixed period B Life with period certain C Fixed amount D Interest only
A Fixed period
All of the following are beneficiary designations EXCEPT A Specified. B Tertiary. C Contingent. D Primary.
A Specified.
The owner of a life insurance policy wishes to name two beneficiaries for the policy proceeds. What will the soliciting insurance producer say? A The policyowner can specify the way proceeds are split in the policy. B The way proceeds are split between beneficiaries is decided by which type of policy is chosen. C Life insurance policies may have only one beneficiary. D The proceeds will be split evenly between the two beneficiaries
A The policyowner can specify the way proceeds are split in the policy.
Which of the following requires certain qualifying factors be met in order for an insured to receive accelerated death benefits? A Disability Claim Form B Conditions for Payment Form C Beneficiary Change Form D Medical Authorization Form
B Conditions for Payment Form
All of the following are dividend options EXCEPT A Paid-up additions. B Fixed-period installments. C Accumulated at interest D Reduction of premium.
B Fixed-period installments.
The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose? A Fixed amount option B Interest only option C Life income with period certain D Joint and survivor
B Interest only option
An insured who had a life insurance policy for $1 million died. In filing the claim, his wife and children discovered that there was no beneficiary named on the policy. What will happen to the death benefit in this case? A The insurer will retain the benefit. B It will go to the insured's estate. C It will be divided among his children. D It will be automatically paid
B It will go to the insured's estate.
Which of the following settlement options in life insurance is known as straight life? A Fixed amount B Life income C Fixed period D Interest only
B Life income
Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary? A Fixed-amount B Life income with period certain C Joint and survivor D Single life
B Life income with period certain
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? A Sue for the right to not pay the death benefit B Pay the death benefit C Refuse to pay the death benefit because of the misstatement on the application D Pay a decreased death benefit
B Pay the death benefit
Which of the following describes attachments made to policies that either add or modify coverage? A Exclusions B Riders C Conditions D Restriction
B Riders
Nonforfeiture values guarantee which of the following for the policyowner? A That the policy premiums will never increase B That the cash value will not be lost C That the dividends will be paid annually D That the death benefit will be paid in a lump sum
B That the cash value will not be lost
Which of the following is TRUE about nonforfeiture values? A Policyowners do not have the authority to decide how to exercise nonforfeiture values. B They are required by state law to be included in the policy. C They are optional provisions. D A table showing nonforfeiture values for the next 10 years must be included in the polic
B They are required by state law to be included in the policy.
What is the main purpose of a Retained Asset Account? A To allow the insurer to retain the policy proceeds until all loans are paid up by the insured B To maintain life policy's cash value C To serve as a temporary storage of funds for the beneficiary D To allow the death benefit to accumulate interest
C To serve as a temporary storage of funds for the beneficiary
An individual applied for a life insurance policy on Jan. 10. The policy was issued on Jan. 31; however, because the insured's agent was on vacation at that time, the policy was not delivered until Feb. 8. After reading through the policy provisions, the insured decided to return the policy to the insurer. When would the insured need to return the policy for a refund of premium? A By Feb. 10, or within 10 days of policy issue B Within 30 days of the application C Anytime, because the agent did not deliver the policy promptly D By Feb. 18, or within 10 days of policy delivery
D By Feb. 18, or within 10 days of policy delivery
Which of the following riders added to a life insurance policy can pay part of the death benefit to the insured to cover expenses incurred in a nursing or convalescent home? A Long-term care B Accidental death C Guaranteed insurability D Payor benefit
A Long-term care
The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the A One-year term option. B Paid-up option. C Accelerated endowment. D Paid-up additions
A One-year term option.
When calculating the amount a policyowner may borrow from a variable life policy, what must be subtracted from the policy's cash value? A Outstanding loans and interest B The face amount C Mortality costs D The cash surrender amount
A Outstanding loans and interest
Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled? A Payor Benefit B Jumping Juvenile C Juvenile Premium Provision D Waiver of Premium
A Payor Benefit
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 the injuries. How much will the beneficiary receive from the policy? A $0 B $100,000 C $200,000 D $100,000 plus the total of paid premiums
C $200,000
What happens when a policy is surrendered for its cash value? A The policy can be reinstated by paying back all policy loans and premiums. B The policy can be converted to term coverage. C Coverage ends and the policy cannot be reinstated. D Coverage ends but the policy can be reinstated at any time
C Coverage ends and the policy cannot be reinstated.
Which of the following is NOT typically excluded from life policies? A Death that occurs while a person is committing a felony B Death due to war or military service C Death due to plane crash for a fare-paying passenger D Self-inflicted death
C Death due to plane crash for a fare-paying passenger
All of the following are features and requirements of the Living Needs Rider EXCEPT A The remainder of the policy proceeds is payable to the beneficiary at the insured's death. B It provides funds for medical and nursing home expenses to a terminally ill insured. C Diagnosis must indicate that death is expected within 3 years. D It is usually available at no additional charge
C Diagnosis must indicate that death is expected within 3 years.
When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option? A Life income period certain B Extended term C Fixed amount D Fixed period
C Fixed amount
Which of the following is true regarding a single life settlement option? A Proceeds are paid out in a lump sum. B It provides income for a specified period of time. C It provides income the beneficiary cannot outlive. D Payments continue until the entire principal is exhausted
C It provides income the beneficiary cannot outlive.
When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to A Pay back all premiums owed plus interest. B Receive payments for a fixed amount. C Purchase a single premium policy for a reduced face amount. D Purchase a term rider to attach to the policy
C Purchase a single premium policy for a reduced face amount.
Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option? A Length of income period B Amount of interest C Size of each installment D Predetermined length of time stated in the contract
C Size of each installment
The interest earned on policy dividends is A Tax deductible. B 40% taxable, similar to a capital gain. C Taxable. D Nontaxable
C Taxable.
Children's riders attached to whole life policies are usually issued as what type of insurance? A Adjustable life B Whole life C Term D Variable life
C Term
The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT A Projected interest rates. B Face amount of the policy. C The insured's age at death. D The beneficiary's life expectancy
C The insured's age at death.
Which of the following best describes fixed-period settlement option? A Only the principal amount will be paid out within a specified period of time. B The death benefit must be paid out in a lump sum within a certain time period. C Income is guaranteed for the life of the beneficiary. D Both the principal and interest will be liquidated over a selected period of time.
D Both the principal and interest will be liquidated over a selected period of time.
When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? A In lesser amounts for the remaining policy term of age 100. B Equal to the cash value surrendered from the policy C The same as the original policy minus the cash value D Equal to the original policy for as long as the cash values will purchase
D Equal to the original policy for as long as the cash values will purchase
Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy? A The Entire Contract Provision B The Consideration Clause C Assignment Rights D Owner's Rights
D Owner's Rights
An insured died by suicide one year after the life insurance policy was issued. The insurer will A Pay the policy's cash value. B Pay the full death benefit to the beneficiary. C Pay nothing. D Refund the premiums paid.
D Refund the premiums paid.
An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries? A The beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid over time. B The beneficiary will receive 2/3 of the total benefit, with the final 1/3 payable when the first beneficiary dies. C One of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies. D The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.
D The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.
An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have? A Adjustable life B Term life C Limited pay D Universal life
D Universal life
What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military? A Limited benefit B Aviation C Hazardous occupation D War or military service
D War or military service
