Chapter Five Quiz

Question 1

All of the following are true regarding insurance policy loans except:

Answer 1

Policy loans can be made on policies that do not accumulate cash value

Question 2

What is the other term for the cash payment settlement option?

Answer 2

Lump sum

Question 3

A fee charged to the insured when a policy or annuity is exchanged for its cash value is:

Answer 3

Surrender charge

Question 4

All of the following are true statements regarding the accumulation at interest option except:

Answer 4

The interest is not taxable since it remains inside the insurance policy

Question 5

An insured pays an annual premium to his insurer. In return, the insurer promises to pay benefits in accordance with the terms of the contract. This is called:

Answer 5

Consideration

Question 6

The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this?

Answer 6

Reduction of premium

Question 7

When a reduced paid-up nonforfeiture option is chosen, what happens to the face amount of the policy?

Answer 7

It is reduced to the amount of what the cash value would buy as a single premium

Question 8

An insured purchased a life policy in 2010 and died in 2020. The insurance company discovers at that time that the insured had misstated information about her insurance history on the application. What will the insurer do?

Answer 8

Pay the death benefit

Question 9

J applied for a life insurance policy on January 10th. The policy was issued on Jan 31st. J’s agent was vacationing at the time the policy was issued, so J did not receive the plicy until Feb 18th. J decieds that he does not want the policy. When would J need to return the policy to the insurer in order to receive a full refund of premium paid?

Answer 9

Feb 28th, or 10 days after the time the policy is delivered

Question 10

What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident?

Answer 10

Common Disaster Clause

Question 11

When a life insurance policy stipulates that the beneficiary will receive payments in specifed installments or for a specified number of years, what provision prevents the beneficiary from changing or borrowing from the planned installments?

Answer 11

Spendthrift provision

Question 12

An insured has chosen joint 2/3 survivor as the settlement option. What does this mean to the beneficaries?

Answer 12

The surviving beneficiaries will continue receiving 2/3 of the benefit paid when both beeficiaries were alive