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Life Insurance > 4.2 Exam Flash Cards > Flashcards

4.2 Exam Flash Cards

1
Q

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

A

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

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2
Q

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

A

extended term

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3
Q

beneficiary next in line after the primary

A

contingent

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4
Q

what three nonforfeiture options in life insurance policies?

A

cash surrender
reduced paid up
extended term

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5
Q

what are policy dividends

A

return of unused premiums

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6
Q

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

A

settlement options

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7
Q

what required provision protects against unintentional policy lapse?

A

grace period

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8
Q

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

A

collateral assignment

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9
Q

what settlement options are available in life insurance policies?

A 
lump sum/cash
fixed period
fixed amount
life income
interest only
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10
Q

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

A

waiver of premium

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11
Q

what is the purpose of settlement options in life insurance policies

A

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

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12
Q

what are the most common exclusions in life insurance policies?

A

war and military service, hazardous occupation, aviation

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13
Q

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

A

proceeds paid to the insured’s estate

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14
Q

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

A

revocable

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15
Q

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.

A

it will be paid to the insured’s estate

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16
Q

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

A

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

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17
Q

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

A

grace period

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18
Q

what are the dividend options in life insurance policies?

A 
paid-up additions (default)
cash
reduced premium
accumulation at interest
one year term
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19
Q

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

A

paid-up additions

20
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

incontestability provision

21
Q

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

A

when the primary beneficiary dies before the insured

22
Q

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

A

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

23
Q

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

A

paid-up additions

24
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

pay a reduced death benefit

25
Q

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

A

the primary beneficiary

26
Q

who does the common disaster clause protect

A

the contingent beneficiary

27
Q

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

A

lump-sum payment

28
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

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

29
Q

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

A

a copy of the original insurance application

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

30
Q

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

A

reduced paid-up

31
Q

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

A

cash surrender

32
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

amount of the loan will be subtracted from the death benefit

33
Q

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

A

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

34
Q

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?

A

entire contract

35
Q

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

A

reinstatement

36
Q

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

A

other-insured rider

37
Q

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

A

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

38
Q

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

A

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

39
Q

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

A

policy owner

40
Q

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

A

policy owner

41
Q

what does the term double indemnity mean

A
  • insurer will pay a benefit twice the face amount

- used in accidental death riders

42
Q

what is the purpose of a free-look period?

A

allow the insured to refund policy with a full refund.

43
Q

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

A

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

44
Q

what is the purpose of the automatic premium loan provision?

A

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

45
Q

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

A

absolute assignment

Life Insurance (21 decks)

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