4.2 Exam Flash Cards

Question 1

What happens to a policies cash value under an extended-term nonforfeiture option

Answer 1

the cash value is converted to the same face amount as in the whole life policy
(Table of Guaranteed Values)

Question 2

What nonforfeiture option is automatically selected by the company if not chosen by the policy owner

Answer 2

extended term

Question 3

beneficiary next in line after the primary

Answer 3

contingent

Question 4

what three nonforfeiture options in life insurance policies?

Answer 4

cash surrender
reduced paid up
extended term

Question 5

what are policy dividends

Answer 5

return of unused premiums

Question 6

the term used to describe methods of payments of the death benefit to the beneficiary upon the insureds death

Answer 6

settlement options

Question 7

what required provision protects against unintentional policy lapse?

Answer 7

grace period

Question 8

what type of assignment is used to secure the payment of a debt with an existing life insurance policy?

Answer 8

collateral assignment

Question 9

what settlement options are available in life insurance policies?

Answer 9

lump sum/cash
fixed period
fixed amount
life income
interest only

Question 10

what life policy rider allows the company to forgo collecting the premium if the insured becomes disabled?

Answer 10

waiver of premium

Question 11

what is the purpose of settlement options in life insurance policies

Answer 11

to determine how the death benefit will be paid to the beneficiary

Question 12

what are the most common exclusions in life insurance policies?

Answer 12

war and military service, hazardous occupation, aviation

Question 13

what happens to the proceeds of a life insurance policy if there is no named beneficiary

Answer 13

proceeds paid to the insured’s estate

Question 14

what type of beneficiary can be charged at any point by the policy owner

Answer 14

revocable

Question 15

the sole beneficiary of a life insurance policy dies before the insured. If the policy owner does not amend the beneficiary designation and does not have a secondary what will happen to the policy’s benefit.

Answer 15

it will be paid to the insured’s estate

Question 16

when can an insurance company use suicide as a defense against paying a death claim

Answer 16

when suicide is committed within a specified period of time after the policy is purchased (usually 2 years)

Question 17

What provision in a life insurance policy extends coverage beyond the premium due date?

Answer 17

grace period

Question 18

what are the dividend options in life insurance policies?

Answer 18

paid-up additions (default)
cash
reduced premium
accumulation at interest
one year term

Question 19

what dividend option can increase the death benefit of the existing life policy

Answer 19

paid-up additions

Question 20

what life insurance policy provision prevents an insurer from disputing or denying a claim due to misstatements on the application after a certain period of time?

Answer 20

incontestability provision

Question 21

when will a contingent beneficiary receive death benefits from a life insurance policy?

Answer 21

when the primary beneficiary dies before the insured

Question 22

with the reduction of premium dividend option, how is dividend used?

Answer 22

the dividend is applied to the next year’s premium (it reduces the next year’s premium)

Question 23

what dividend option is automatically selected by the company if not chosen by the policy owner?

Answer 23

paid-up additions

Question 24

an insurer has discovered a representation on a life insurance policy application regarding the insured’s age. The insured is 10 years older than he stated on the application. What will the insurer do regarding the death benefit?

Answer 24

pay a reduced death benefit

Question 25

what beneficiary designation has first claim to the death proceeds of a life insurance policy?

Answer 25

the primary beneficiary

Question 26

who does the common disaster clause protect

Answer 26

the contingent beneficiary

Question 27

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

Answer 27

lump-sum payment

Question 28

in the fixed period settlement option, how will the number of installments for the death benefit proceeds determine the amount of the installments?

Answer 28

the longer the period selected, the smaller each installment will be

Question 29

to meet the requirement of the entire contract policy provision, an insurance policy must contain what?

Answer 29

a copy of the original insurance application | policy and a copy of the application, along with any riders or amendments

Question 30

what nonforfeiture option provides coverage for the longest period of time?

Answer 30

reduced paid-up

Question 31

under what nonforfeiture option does the company pay the policy's surrender value and have no further obligation to the policy owner?

Answer 31

cash surrender

Question 32

a policyowner borrowed a portion of cash value from his whole life policy. If the loan is not repaid, how will that affect the death benefit to the beneficiary?

Answer 32

amount of the loan will be subtracted from the death benefit

Question 33

with the interest-only settlement option, what happens to the policy's death benefit?

Answer 33

policy proceeds are retained by the insurance company, only the interest is paid to the beneficiary

Question 34

what life insurance policy provision states that both the policy and a copy of the application form the contract between the policy owner and the insurer?

Answer 34

entire contract

Question 35

what provision allows the policy owner to reactivate a lapsed life insurance policy within a specified period of time with proof of insurability

Answer 35

reinstatement

Question 36

what is the name for a life insurance policy rider that provides coverage on the insured's family members?

Answer 36

other-insured rider

Question 37

an applicant for life insurance misstated her age on the policy application (sure they did). How will this affect the death benefit?

Answer 37

death benefit will be adjusted to the amount that the insured could obtain for her correct age.

Question 38

what is the advantage of reinstating a life policy as opposed to applying for a new one?

Answer 38

policy premium in a reinstated policy will be set according to the insured's original age.

Question 39

who controls changes in premium payments, face values, and loans in a life insurance policy?

Answer 39

policy owner

Question 40

who has the right to the cash value of a life insurance policy.

Answer 40

policy owner

Question 41

what does the term double indemnity mean

Answer 41

- insurer will pay a benefit twice the face amount | - used in accidental death riders

Question 42

what is the purpose of a free-look period?

Answer 42

allow the insured to refund policy with a full refund.

Question 43

is the beneficiary required to have insurable interest in the insured?

Answer 43

No. Beneficiaries do not have insurable interest in the insured.

Question 44

what is the purpose of the automatic premium loan provision?

Answer 44

to prevent the unintentional lapse of a policy because of nonpayment of the premium

Question 45

which of the two types of policy assignments requires the transfer of all ownership right in the policy to a third party?

Answer 45

absolute assignment