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Life insurance > chap. 4 > Flashcards

chap. 4 Flashcards

1
Q

Q: When will a contingent beneficiary receive death benefits from a life insurance policy?

A

A: When the primary beneficiary dies before the insured

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2
Q

Q: What dividend option can increase the death benefit of the existing life policy?

A

A: Paid-up additions

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3
Q

The paid-up addition option uses the dividend

A

To purchase a smaller amount of the same type of insurance as the original policy.

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4
Q

Q: When can an insurance company use suicide as a defense against paying a death claim?

A

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

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5
Q

An insured committed suicide one year after his life insurance policy was issued. The insurer will

A

Refund the premiums paid.

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6
Q

Q: What does the term double indemnity mean?

A

A: The insurer will pay a benefit of twice the face amount.

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7
Q

Q: What happens to a policy’s cash value under an extended term nonforfeiture option?

A

A: The cash value is converted to the same face amount as in the whole life policy.

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8
Q

When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount?

A

Equal to the original policy for as long as the cash values will purchase.

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9
Q

Q: With the reduction of premium dividend option, how is the dividend used?

A

A: The dividend is applied to the next year’s premium (it reduces the next year’s premium).

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10
Q

Q: What life insurance policy provision states that both the policy and a copy of the application form the contract between the policyowner and the insurer?

A

A: Entire contract

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11
Q

Q: What is the purpose of settlement options in life insurance policies?

A

A: To determine how the death benefit will be paid to the beneficiary

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12
Q

Q: What is the purpose of the Automatic Premium Loan provision?

A

A: To prevent the unintentional lapse of a policy because of nonpayment of the premium

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13
Q

Q: What are the three nonforfeiture options in life insurance policies?

A

A: Cash surrender, reduced paid-up, and extended term

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14
Q

Q: Under what nonforfeiture option does the company pay the policy’s surrender value and have no further obligations to the policy owner?

A

A: Cash surrender

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15
Q

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

A

A: Collateral assignment

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16
Q

Q: What are the dividend options in life insurance policies?

A

A: Cash, reduced premium, accumulation at interest, paid-up additions, paid-up option, one-year term, and acceleration of endowment

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17
Q

Q: 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?

A

A: Incontestability

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18
Q

Q: What are the most common exclusions in life insurance policies?

A

A: War and military service, hazardous occupation, and aviation

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19
Q

Q: If a settlement option is not chosen by the policyowner or the beneficiary, what option will be used by the insurer?

A

A: Lump-sum payment

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20
Q

Q: What type of beneficiary can be changed at any point by the policyowner?

A

A: Revocable

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21
Q

A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the

A

Revocable beneficiary.

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22
Q

Q: 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?

A

A: The amount of the loan will be subtracted from the death benefit.

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23
Q

Q: What settlement options are available in life insurance policies?

A

A: Lump-sum/cash, fixed period, fixed amount, life income, interest only

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24
Q

Q: To meet the requirement of the entire contract policy provision, an insurance policy must contain what?

A

A: A copy of the original insurance application

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25
Q

Q: What dividend option is automatically selected by the company if not chosen by the policyowner?

A

A: Paid-up additions

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26
Q

Q: In the fixed-period settlement option, how will the number of installments for the death benefit proceeds determine the amount of the installments?

A

A: The longer the period selected, the smaller each installment will be

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27
Q

Q: Who controls changes in premium payments, face values, and loans in a life insurance policy?

A

A: Policyowner

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28
Q

Q: What nonforfeiture option provides coverage for the longest period of time?

A

A: Reduced paid-up

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29
Q

Q: 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?

A

A: Pay a reduced death benefit

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30
Q

Q: What is the purpose of a free-look period?

A

A: To allow the insured to return the policy with a full refund

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31
Q

Q: What beneficiary designation has first claim to the death proceeds of a life insurance policy?

A

A: Primary beneficiary

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32
Q

Q: What are policy dividends?

A

A: Return of unused premiums

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33
Q

Q: With the interest only settlement option, what happens to the policy’s death benefit?

A

A: Policy proceeds are retained by the insurance company; only the interest is paid to the beneficiary

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34
Q

Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?

A

The beneficiary will only receive payments of the interest earned on the death benefit.

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35
Q

Q: What life policy rider allows the company to forgo collecting the premium if the insured becomes disabled?

A

A: Waiver of premium

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36
Q

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called

A

Waiver of premium

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37
Q

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

A

Monthly premium waiver and monthly income

38
Q

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

A

6 months

39
Q

What limits the amount that a policyowner may borrow from a whole life insurance policy?

A

Cash value

40
Q

Q: What term is used to describe methods of payment of the death benefit to the beneficiary upon the insured’s death?

A

A: Settlement options

41
Q

Q: Which of the two types of policy assignments requires transfer of all ownership rights in the policy to a third party?

A

A: Absolute assignment

42
Q

Q: Who has the right to the cash value of a life insurance policy?

A

A: Policyowner

43
Q

Q: What is the name for a life insurance policy rider that provides coverage on the insured’s family members?
Q:A rider attached to a life insurance policy that provides coverage on the insured’s family members is called the

A

A: Other-insured rider

44
Q

Q: Is the beneficiary required to have insurable interest in the insured?

A

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

45
Q

Q: What nonforfeiture option is automatically selected by the company if not chosen by the policyowner?

A

A: Extended term

46
Q

Which nonforfeiture option has the highest amount of insurance protection?

A

Extended Term

47
Q

Q: The sole beneficiary of a life insurance policy dies before the insured. If the policyowner does not amend the beneficiary designation, what will happen to the policy’s death benefit?

A

A: It will be paid to the insured’s estate.

48
Q

Q: Who does the common disaster clause protect?
Q: What type of beneficiary is next in line after the primary beneficiary?

A

A: The contingent beneficiary

49
Q

What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident?

A

common disaster clause

50
Q

Q: What provision in a life insurance policy extends coverage beyond the premium due date?
Q: What required provision protects against unintentional policy lapse?
Q:The automatic premium loan provision is activated at the end of the

A

A: Grace period

51
Q

How long is the grace period on a group life insurance policy?

A

31 days

52
Q

Q: What happens to the proceeds of a life insurance policy if there is no named beneficiary?

A

A: The proceeds are paid to the insured’s estate.

53
Q

Q: What provision allows the policyowner to reactivate a lapsed life insurance policy within a specified period of time with proof of insurability?

A

A: Reinstatement

54
Q

Which of the following statements about the reinstatement provision is true?

A

It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.

55
Q

Q: What is the advantage of reinstating a life insurance policy as opposed to applying for a new one?

A

A: Policy premium in a reinstated policy will be set according to the insured’s original age.

56
Q

Q: An applicant for life insurance misstated her age on the policy application. How will this affect the death benefit?

A

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

57
Q

Which of the following applies to the 10-day free-look privilege?

A

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

58
Q

If the policy owner, the insured, and the beneficiary under a life insurance policy are three different people, who has the ownership rights?

A

Policy owner

59
Q

The Ownership provision entitles the policyowner to do all of the following EXCEPT

A

Set premium rates.

60
Q

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?
An insured pays $1,200 annually for her life insurance premium. The insured applies this year’s $300 worth of accumulated dividends to the next year’s premium, thus reducing it to $900. What option does this describe?

A

Reduction of premium

61
Q

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

Universal life

62
Q

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called

A

Waiver of premium.

63
Q

Under which of the following circumstances would an insurer pay accelerated benefits?

A

An insured is diagnosed with cancer and needs help paying for her medical treatment.

64
Q

Which of the following riders would NOT cause the Death Benefit to increase?

A

Payor Benefit Rider

65
Q

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

A

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

66
Q

If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used?

A

Lump Sum

67
Q

A couple owns a life insurance policy with a Children’s Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability?

A

Proof of insurability is not required.

68
Q

All of the following are true regarding the guaranteed insurability rider EXCEPT

A

This rider is available to all insureds with no additional premium.

69
Q

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

A

Guaranteed insurability rider.

70
Q

Which of the following is true about the premium on the children’s rider in a life insurance policy?

A

It remains the same no matter how many children are added to the policy.

71
Q

When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died first. Which of the following would receive the death benefit?

A

The insured’s contingent beneficiary

72
Q

When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?

A

It is reduced to the amount of what the cash value would buy as a single premium.

73
Q

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

A

It provides income the beneficiary cannot outlive.

74
Q

A 40-year old man buys a whole life policy and names his wife as his only beneficiary. His wife dies 10 years later. He never remarries and dies at age 61, leaving 2 grown-up children. Assuming he never changed the beneficiary, the policy proceeds will go to

A

The insured’s estate.

75
Q

A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change?

A

Cost of Living Rider

76
Q

Which of the following statements is TRUE concerning irrevocable beneficiaries?

A

They can be changed only with the written consent of that beneficiary.

77
Q

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

A

If the primary beneficiary predeceases the insured

78
Q

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

A

Interest

79
Q

Which is true about a spouse term rider?

A

The rider is usually level term insurance.

80
Q

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

The insured’s age at death.

81
Q

Which is TRUE about the cash surrender nonforfeiture option?

A

Funds exceeding the premium paid are taxable as ordinary income.

82
Q

The interest earned on policy dividends is

A

Taxable

83
Q

An insured purchased a life policy in 2010 and died in 2017. The insurance company discovers at that time that the insured had misstated information during the application process. What can they do?

A

Pay the death benefit

84
Q

Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early?

A

Paid-up option

85
Q

Which of the following is TRUE about the 10-day free-look period in a Life Insurance policy?

A

It begins when the policy is delivered.

86
Q

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

A

Universal Life

87
Q

Life insurance policies that have cash value must provide for a maximum policy loan interest rate of no more than

A

8% per annum.

88
Q

J applied for a life insurance policy on January 10. The policy was issued on January 31. J’s agent was vacationing at the time the policy was issued, so J did not receive the policy until February 18. J decides that he does not want the policy. When would J need to return the policy to the insurer in order to receive a full refund of premium paid?

A

February 28th, or 10 days after the time the policy is delivered.

89
Q

If an insured continually uses the automatic premium loan option to pay the policy premium,

A

The policy will terminate when the cash value is reduced to nothing.

90
Q

Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insured’s’ death?

A

A minor son of the insured

91
Q

All of the following are beneficiary designations EXCEPT

A

Specified.

92
Q

Who can make changes to the policy once it is in effect?

A

An executive officer of the insurer

Life insurance (8 decks)

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