Chapter 5

Question 1

Define the term consideration.

Answer 1

An exchange of values between two parties.

Question 2

What percentage of premium must be returned to the policy owner if a policy is returned during the free look period?

Answer 2

100% of the premiums paid

Question 3

What clause allows an insurer to pay a portion of the death benefit to an individual who paid for funeral expenses?

Answer 3

The Facility of Payment Clause

Question 4

If an insureds ago is misstated, what will eventually happen to any future claim?

Answer 4

The benefit will be adjusted to reflect the misstated age.

Question 5

What does per capita beneficiary depiction mean?

Answer 5

It means per person or per head

Question 6

Would it be better to reinstated an existing policy or attempt to purchase a new policy?

Answer 6

Reinstated the original policy since premium is based on insureds age at issuance and may result in lower premiums.

Question 7

___________ is the transfer of policy rights to another party.

Answer 7

Assignment

Question 8

Any policy modifications must be endorsed by the _________ and __________ to the policy.

Answer 8

Insurer; attached

Question 9

A __________ is usually established when benefits are payable to a minor.

Answer 9

Trust

Question 10

Which provision allows an insurer to charge a service fee for the collection of premium?

Answer 10

The Payment of Premium provision

Question 11

What is another name for the transfer of ownership?

Answer 11

Assignment

Question 12

Death by suicide is not covered during the first ______ years of policy issue.

Answer 12

2

Question 13

A grace period is designed to prevent the __________ lapse of a policy.

Answer 13

Unintentional

Question 14

What is another name for the free look provision?

Answer 14

The 10 day Right to Examine

Question 15

What would a parent use to change ownership of a child’s policy?

Answer 15

An absolute assignment

Question 16

Which beneficiary designation means per family line or lineage?

Answer 16

The per stripes beneficiary designation

Question 17

The minimum length of a free look period is ______ days.

Answer 17

10

Question 18

T/F: Everyone attempting to reinstated a policy within 3 years of its lapse date will be accepted.

Answer 18

F

Question 19

T/F: the entire contract provision is a mandatory provision.

Answer 19

T

Question 20

T/F: Any immediate family member may take a loan out against a persons insurance policy.

Answer 20

F; only the policy owner has the right to take a loan out against a policy.

Question 21

What is the name for an insurers consideration to the applicant?

Answer 21

The warranty

Question 22

When must the optional APL provision be selected?

Answer 22

At the time of application

Question 23

What happens to a policy if the premium is not paid during the grace period?

Answer 23

It will lapse for nonpayment of premium

Question 24

T/F: A term-to-term policy conversion with the same company does not require evidence of insurability.

Answer 24

T

Question 25

What provision required an adjustment in benefits if the insureds age has been improperly recorded?

Answer 25

The Misstatement of Age provision

Question 26

First-in-line beneficiaries are also known as _________, second-in-line as __________, and third-in-line as ____________.

Answer 26

Primary; Contingent; Tertiary

Question 27

Policy loan interest is due each year on the ___________ anniversary date.

Answer 27

Policy

Question 28

A woman listed as a man on an application will probably receive a ________ benefit at death.

Answer 28

Higher

Question 29

Which beneficiary depiction may not be changed without permission from the beneficiary?

Answer 29

An irrevocable beneficiary depiction

Question 30

List two examples of an owners right.

Answer 30

The right to change beneficiary or premium payment mode.

Question 31

Explain the Simultaneous Death Act (Common Disaster).

Answer 31

The assumption that the primary beneficiary died prior to the insured when both die in a common accident

Question 32

The maximum loan value is equal to the _______ minus any projected __________.

Answer 32

Cash value; interest

Question 33

Taking a cash value policy loan __________ create a taxable event.

Answer 33

Does not

Question 34

What clause is a summary of the entire contract and is usually found in the first or face page of the contract?

Answer 34

The Insuring Clause

Question 35

What are the 4 common modes of premium payment?

Answer 35

Annual, semi annual, quarterly, monthly

Question 36

An insurer must respond to an applicant for reinstatement within ____ days of receiving the paperwork.

Answer 36

45

Question 37

Which payment mode would be the least expensive over the course of a year?

Answer 37

The annual payment mode

Question 38

Is an insured afforded coverage during the grace period?

Answer 38

Yes

Question 39

Does a beneficiary have any owners rights?

Answer 39

No

Question 40

If death occurs with an outstanding policy loan, what is subtracted from the death benefit?

Answer 40

The remaining amount of the loan plus an accrued interest

Question 41

Within a contract, where does an insurer make its promise to pay benefits?

Answer 41

In the Insuring Clause

Question 42

T/F: A whole life to term conversion with the same company does not require evidence of insurability.

Answer 42

F; conversion from whole life to term will always require evidence of insurability

Question 43

Only an ______________ of an _________ is provided the authority to make or waive a policy provision.

Answer 43

Approved officer; insurer

Question 44

Which type of policy allows for cash value loans — term or whole life?

Answer 44

Whole life

Question 45

The ___________ war exclusion only excludes benefits of death is the direct result of battle.

Answer 45

Results

Question 46

How are monthly premiums generally paid?

Answer 46

An electronic fund transfer through a persons bank

Question 47

Understating age on a life application will mean a _________ death benefit will be paid.

Answer 47

Lower

Question 48

What is the most common life insurance policy exclusion?

Answer 48

War

Question 49

Beginning on the policy delivery date, the free look provision must be provided for no less than ______ days.

Answer 49

10

Question 50

A policy is said to be __________ after the contract has been issued for _____ or more years.

Answer 50

Incontestable; 2

Question 51

What right does the APL option provide to the insurer?

Answer 51

The right to borrow from the cash value to pay overdue premium

Question 52

Who two items constitute an applicants consideration?

Answer 52

Application information and initial premium

Question 53

If no beneficiary is listed, policy benefits will be paid to the insureds __________.

Answer 53

Estate

Question 54

What type of assignment is used to secure a loan?

Answer 54

A collateral assignment

Question 55

Identify the acronym: APL

Answer 55

Automatic Premium Loan

Question 56

A _______________ is a trust listed in a persons will.

Answer 56

Testamentary

Question 57

Is interest paid on a policy loan tax deductible?

Answer 57

No

Question 58

The transfer of all policy rights to another party is referred to as _______________.

Answer 58

Absolute assignment

Question 59

Who selects how often a policy premium is paid?

Answer 59

The policy owner

Question 60

Name some commons policy exclusions.

Answer 60

War, private aviation, suicide (first 2 years), dangerous hobbies or occupations, and criminal acts

Question 61

Benefit proceeds left to an insureds estate will be decided by a _________ court.

Answer 61

Probate

Question 62

Suicide is covered once the policy has been issued for _____ years.

Answer 62

2

Question 63

List some examples of policyowner rights.

Answer 63

Name/change a beneficiary, select premium mode, receive dividends, take loans against the contract, and assign benefits

Question 64

A fixed interest rate of no more than ____% may be assessed on a policy loan.

Answer 64

8

Question 65

___________________ is the transfer of some, but not all, policy rights to another party.

Answer 65

Collateral assignment

Question 66

Explain the concept of absolute assignment.

Answer 66

The transfer of all policy rights to another

Question 67

Which type of trust is created during the life of the insured?

Answer 67

An inter vivos trust

Question 68

To whom is the interest earned on assets retained by an insurer taxed?

Answer 68

To the beneficiary

Question 69

Do beneficiaries have contractual rights to a contract?

Answer 69

No

Question 70

How long does an insurer have to contest the validity of a claim based on false application information?

Answer 70

For two years following the issuance of the policy

Question 71

T/F: Beneficiary listings may be changed by the insurer using a change of beneficiary form.

Answer 71

F; the policy owner, not the insurer, may change the beneficiary

Question 72

Is a grace period a required provision?

Answer 72

Yes

Question 73

When would the APL option be activated?

Answer 73

Following the expiration of the grace period

Question 74

How long is a grace period?

Answer 74

No less than 31 days

Question 75

What is the APL option designed to prevent?

Answer 75

The unintentional lapse of a policy