chapter 3-life provisions quiz

Question 1

L takes out a life insurance Policy and dies 10 years later. during the claim process, the insurer discovers that L had understate her age on the application. under the misstatement of a provision, the insurer will

Answer 1

adjust the death benefit to a reduced amount

Question 2

D is the policy owner and insured for a $50,000 life insurance policy. the beneficiary is D’s wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. if D dies without making any further changes, to whom will the policy proceeds be paid to?

Answer 2

Ex-wife.

D’s exwife is still the beneficiary of this policy even though policy ownership has changed to his current spouse

Question 3

M has an insurance policy that also has an outstanding policy loan at the time of M’s death. the insurer will deduct the outstanding loan balance from the

Answer 3

policy proceeds

Question 4

S buys a $50,000 whole life policy with a $50,000 accidental death and dismemberment rider. S dies 1 year later of natural causes. how much will the insurer pay the beneficiary?

Answer 4

$50,000

Question 5

which of these actions is taken when a policyowner uses a life insurance policy as collateral for a bank loan?

Answer 5

collateral assignment

Question 6

when an insurer issues a policy that refuses to cover certain risks, this is referred to as an

Answer 6

exclusion

Question 7

a(n) ______ rider may be used to include coverage for children under their parents life insurance policy.

Answer 7

term

Question 8

the advantage of reinstate an original life policy is

Answer 8

the premiums are based on a younger age

Question 9

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 purpose?

Answer 9

interest only

Question 10

all of these statements concerning settlement options are true except

Answer 10

only the beneficiary may select

Question 11

the accelerated death benefit provision in a life insurance policy is also known as

Answer 11

living benefit

Question 12

B recently died and was insured with a life insurance policy for over 5 years, during the claims process, the insurer discovered that B had understated his age by 5 yearsat the tie of application. in this situation the insurer will

Answer 12

pay the amount that the premium would have purchased at the correct age

Question 13

A return of premium life insurance policy is

Answer 13

whole life and increasing term

Question 14

the accidental death and dismemberment (AD&D) provision in a life insurance policy would pay additional benefits if the insured:

Answer 14

is blinded in an accident

Question 15

the _______ is authorized to assign a life insurance policy as collateral for a loan.

Answer 15

policyowner

Question 16

when is the face amount of a Whole Life policy paid?

Answer 16

when the insured dies or a the policys maturity date, whichever happens first

Question 17

how are policyowner dividends treated in regards to income tax

Answer 17

interest on accumulations is taxed

Question 18

P died 5 years after purchasing a life policy. while investigating the claim, the insurer discovered material misrepresentations made by P during the application process. which of these actions will the insurer take?

Answer 18

beneficiary will be paid the death benefit

Question 19

which of these is not considered to be a right given to a policy owner?

Answer 19

modify a provision in the insurance contract

Question 20

K owns a whole-life policy. if K wants an increasing death benefit to protect against inflation, which dividend option should she choose?

Answer 20

paid-up additional insurance

Question 21

which of these statements about a guaranteed insurability option rider is not true?

Answer 21

evidence of insurability is required when the option is excersized

Question 22

the provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called

Answer 22

reinstatment

Question 23

the free-look provision begins

Answer 23

upon receipt of the policy by the policyowner

Question 24

what action will an insurer take if an interest payment on a policy loan is not made on time?

Answer 24

automatically add the amount of interest due to the loan balance

Question 25

K pays on a $20,000 20-year endownment policy for 10 years and dies from an automobile accident. how much will the insurance company pay the beneficiary?

Answer 25

$20,000 death benefit

Question 26

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

Answer 26

beneficiary’s age

Question 27

the purpose of the _______ period clause is to avoid an unintentional lapse of a life insurance policy.

Answer 27

grace

Question 28

dividends paid from a life insurance policy are

Answer 28

issued by the insurer

Question 29

a cost of living rider gives the insured

Answer 29

additional death benefits

this type of coverage is designed to help you hedge your bests against inflation. for example if you purchase this rider your policy is going to increase in value if inflation increased

Question 30

K’s whole life insurance policy lapsed two months ago due to nonpayment. she would now like to reinstate the policy. all of these statements are correct about the policy’s reinstatement except

Answer 30

K will forfeit the right to use the automatic loan provision upon reinstatement

Question 31

which statement is true in regards to a policy loan

Answer 31

past due interest on a policy loan is added to the total debt

Question 32

which of the following nonforfeiture options offers the highest death benefit

Answer 32

extended term

allows the policy owner to use the cash value to purchase a term insurance policy with a death benefit equal to that of the original whole life policy

Question 33

which of the following provisions guarentees that premiums will be wavied if a juvenile life policy owner becomes disabled?

Answer 33

payor clause

ensures that premiums will be waved if juvenile life policy policyowner becomes disabled

Question 34

a potential client age 40, would like to purchase a whole life policy that will accumulate cash value at a faster rate in the early years of the policy. which of these statements made by the producer would be correct?

Answer 34

20-pay life accumulates cash value faster than straight life

Question 35

S buys a $10,000 whole life policy in 2003 and pays and annual premium of $100. s dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. what kind of rider did S include on the policy

Answer 35

return of premium rider

Question 36

which of these nonforfeiture options continue a build up of cash value

Answer 36

reduced paid up

Question 37

a long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following

Answer 37

inability of the insured to perform more than 2 activites of daily living (ADLs)

Question 37

a long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following

Answer 37

inability of the insured to perform more than 2 activites of daily living (ADLs)

Question 38

a nonforfeiture clause gives the policyowner

Answer 38

guaranteed values even if the policy has lapsed

Question 39

typically a life insurance death benefit is paid by lump sum payment. a ______ option is a method of distributing a life insurance policys death benefit OTHER than by a lump sum payment.

Answer 39

settlement

Question 40

how are surrender charges deducted in a life policy with a rear end loaded provision

Answer 40

deducted when the policy is discontinued

Question 41

how are surrender charges deducted in a life policy with a rear end loaded provision

Answer 41

deducted when the policy is discontinued

Question 42

which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself

Answer 42

entire contract provision

nothing my be incorporated by reference meaning that the policy cannot refer to any outside documents as being apart of the contract

Question 43

which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself

Answer 43

entire contract provision

nothing my be incorporated by reference meaning that the policy cannot refer to any outside documents as being apart of the contract

Question 44

additional coverage can be added to a whole life policy by adding a

Answer 44

decreasing term rider

Question 45

whose life is covered on a life insurance policy that contains a payor benefit clause

Answer 45

child