Ch. 3 - Life Provisions

Question 1

What action will an insurer take if an interest payment on a policy loan is not made on time?
A. Cancel the policy if not paid within the grace period.
B. Automatically add the amount of interest due to the loan balance.
C. Subtract from any dividend owed.
D. Disallow any further loans.

Answer 1

B. Automatically add the amount of interest due to the loan balance.

Question 2

A Whole Life insurance policyowner does NOT have the right to
A. Designate a beneficiary.
B. Take out a policy loan.
C. Change the grace period.
D. Assign the policy.

Answer 2

B. Take out a policy loan

Question 3

Which life insurance rider typically appears on a Juvenile life insurance policy?
A. Decreasing term rider.
B. Inflation Rider.
C. Payor Benefit rider.
D. Wavier of Premium rider.

Answer 3

C. Payor Benefit rider.

Question 4

A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?
A. Accelerated Benefits.
B. Wavier of Premium.
C. Cost of Living
D. Return of Premium.

Answer 4

B. Wavier of Premium.

Question 5

How are policyowner dividends treated in regards to income tax?
A. Dividends are not taxable.
B. Interest on accumulations is taxed.
C. Taxed as an ordinary income.
D. Taxed as capital gains.

Answer 5

B. Interest on accumulations is taxed.

Question 6

The free-look provision begins
A. Upon the date of the sales presentation.
B. Upon receipt of the policy by the producer.
C. Upon receipt of the policy by the policyowner.
D. Upon the completion of the application.

Answer 6

C. Upon receipt of the policy by the policyowner.

Question 7

What is the suicide provision designed to do?
A. Decline an applicant who is contemplating suicide.
B. Safeguard the insurer from an applicant who is contemplating suicide.
C. Protect the insurer from ever paying a claim that results from suicide.
D. Allows the insurer the option to pay a death benefit in the event of a suicide.

Answer 7

B. Safeguard the insurer from an applicant who is contemplating suicide.

Question 8

All of the following statements are true regarding a policy’s Grace period, EXCEPT:
A. Past due premiums are waived.
B. Policy loans may still be made.
C. Full coverage continues.
D. Grace period terms are stated in the policy.

Answer 8

A. Past due premiums are waived.

Question 9

A Term Life rider offers the insured
A. Additional life coverage.
B. Cash value.
C. Long-term care coverage.
D. Disability protection.

Answer 9

A. Additional life coverage.

Question 10

Which of these Nonforfeiture Options continue a build-up of cash value?
A. Wavier of Premium.
B. Extended Term.
C. Reduced Paid-Up.
D. Cash Surrender.

Answer 10

C. Reduced Paid-Up.

Question 11

The _______ is authorized to assign a Life Insurance policy as collateral for a loan.
A. Beneficiary.
B. Insured.
C. Policyowner.
D. Lender.

Answer 11

C. Policyowner.

Question 12

Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
A. Modified Whole Life.
B. Variable Life.
C. Universal Life.
D. Adjustable Life.

Answer 12

B. Variable Life.

Question 13

B receives yearly dividends and interest from a participating life insurance policy. Which of these should B include as gross income for federal income tax purposes?
A. Interest and Dividends.
B. Interest only.
C. Dividends only.
D. Neither interest nor dividends are taxable.

Answer 13

B. Interest only.

Question 14

In a life insurance policy, which feature states that the policy will not cover certain risks?
A. Exception.
B. Exclusion.
C. Ejection.
D. Expulsion.

Answer 14

B. Exclusion.

Question 15

N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?
A. Claim will be denied.
B. Claim will be paid in full.
C. Claim will be partially paid.
D. Claim will be decided by arbitrator.

Answer 15

A. Claim will be denied.

Question 16

Which statement regarding the Misstatement of Age provision is considered to be true?
A. Coverage will be adjusted to reflect the insured’s true age if a misstatement of age is discovered.
B. Requires that a new policy must be applied for if a misstatement of age is found on the current policy.
C. Misstatement of Age provision is valid only during the contestable period.
D. Insurer may void the policy if a misstatement of age is discovered.

Answer 16

A. Coverage will be adjusted to reflect the insured’s true age if a misstatement of age is discovered.

Question 17

N is a student pilot with a large life insurance policy. Which of these features would limit the insurer’s obligation in the event of N was killed while flying as a student pilot?
A. Misrepresentation.
B. Exclusion.
C. Collateral assignment.
D. Concealment.

Answer 17

B. Exclusion.

Question 18

When is the face amount of a Whole Life policy paid?
A. At the policy’s maturity date only.
B. When the insured dies or at the policy’s maturity date, whichever happens first.
C. Only when the insured dies.
D. When the policy is surrendered.

Answer 18

B. When the insured dies or at the policy’s maturity date, whichever happens first.

Question 19

S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT:
A. Type of Life Insurance.
B. S’s attained age.
C. Dividend amount used toward purchase.
D. Beneficiary’s age.

Answer 19

D. Beneficiary’s age.

Question 20

The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n):
A. Term rider.
B. Accidental Death and Dismembership ride (AD&D).
C. Family rider.
D, Annuity.

Answer 20

B. Accidental Death and Dismembership ride (AD&D).