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Insurance > Chapter 5 > Flashcards

Chapter 5 Flashcards

1
Q

Define the term consideration.

A

An exchange of values between two parties.

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2
Q

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

A

100% of the premiums paid

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3
Q

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

A

The Facility of Payment Clause

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4
Q

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

A

The benefit will be adjusted to reflect the misstated age.

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5
Q

What does per capita beneficiary depiction mean?

A

It means per person or per head

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6
Q

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

A

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

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7
Q

___________ is the transfer of policy rights to another party.

A

Assignment

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8
Q

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

A

Insurer; attached

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9
Q

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

A

Trust

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10
Q

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

A

The Payment of Premium provision

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11
Q

What is another name for the transfer of ownership?

A

Assignment

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12
Q

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

A

2

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13
Q

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

A

Unintentional

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14
Q

What is another name for the free look provision?

A

The 10 day Right to Examine

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15
Q

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

A

An absolute assignment

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16
Q

Which beneficiary designation means per family line or lineage?

A

The per stripes beneficiary designation

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17
Q

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

A

10

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18
Q

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

A

F

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19
Q

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

A

T

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20
Q

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

A

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

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21
Q

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

A

The warranty

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22
Q

When must the optional APL provision be selected?

A

At the time of application

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23
Q

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

A

It will lapse for nonpayment of premium

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24
Q

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

A

T

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25
Q

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

A

The Misstatement of Age provision

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26
Q

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

A

Primary; Contingent; Tertiary

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27
Q

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

A

Policy

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28
Q

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

A

Higher

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29
Q

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

A

An irrevocable beneficiary depiction

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30
Q

List two examples of an owners right.

A

The right to change beneficiary or premium payment mode.

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31
Q

Explain the Simultaneous Death Act (Common Disaster).

A

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

32
Q

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

A

Cash value; interest

33
Q

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

A

Does not

34
Q

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

A

The Insuring Clause

35
Q

What are the 4 common modes of premium payment?

A

Annual, semi annual, quarterly, monthly

36
Q

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

A

45

37
Q

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

A

The annual payment mode

38
Q

Is an insured afforded coverage during the grace period?

A

Yes

39
Q

Does a beneficiary have any owners rights?

A

No

40
Q

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

A

The remaining amount of the loan plus an accrued interest

41
Q

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

A

In the Insuring Clause

42
Q

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

A

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

43
Q

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

A

Approved officer; insurer

44
Q

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

A

Whole life

45
Q

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

A

Results

46
Q

How are monthly premiums generally paid?

A

An electronic fund transfer through a persons bank

47
Q

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

A

Lower

48
Q

What is the most common life insurance policy exclusion?

A

War

49
Q

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

A

10

50
Q

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

A

Incontestable; 2

51
Q

What right does the APL option provide to the insurer?

A

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

52
Q

Who two items constitute an applicants consideration?

A

Application information and initial premium

53
Q

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

A

Estate

54
Q

What type of assignment is used to secure a loan?

A

A collateral assignment

55
Q

Identify the acronym: APL

A

Automatic Premium Loan

56
Q

A _______________ is a trust listed in a persons will.

A

Testamentary

57
Q

Is interest paid on a policy loan tax deductible?

A

No

58
Q

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

A

Absolute assignment

59
Q

Who selects how often a policy premium is paid?

A

The policy owner

60
Q

Name some commons policy exclusions.

A

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

61
Q

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

A

Probate

62
Q

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

A

2

63
Q

List some examples of policyowner rights.

A

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

64
Q

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

A

8

65
Q

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

A

Collateral assignment

66
Q

Explain the concept of absolute assignment.

A

The transfer of all policy rights to another

67
Q

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

A

An inter vivos trust

68
Q

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

A

To the beneficiary

69
Q

Do beneficiaries have contractual rights to a contract?

A

No

70
Q

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

A

For two years following the issuance of the policy

71
Q

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

A

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

72
Q

Is a grace period a required provision?

A

Yes

73
Q

When would the APL option be activated?

A

Following the expiration of the grace period

74
Q

How long is a grace period?

A

No less than 31 days

75
Q

What is the APL option designed to prevent?

A

The unintentional lapse of a policy

Insurance (10 decks)

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