Legal Concepts

Question 1

which of the following consist of an offer, acceptance, and consideration?

Answer 1

Contract

Question 2

Life and health insurance policies are:

Answer 2

Unilateral contracts

Question 3

The part of a life insurance policy guaranteed to be true is called a(n):

Answer 3

Warranty

Question 4

A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of

Answer 4

adhesion

Question 5

If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?

Answer 5

insured

Question 6

In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?

Answer 6

Unilateral

Question 7

Insurance contracts are known as ____ because certain future conditions or acts must occur before any claims can be paid.

Answer 7

conditional

Question 8

Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features?

Answer 8

Aleatory

Question 9

What is the consideration given by an insurer in the Consideration clause of a life policy?

Answer 9

Promise to pay a death benefit to a named beneficiary

Question 10

What type of life insurance incorporates flexible premiums and an adjustable death benefit?

Answer 10

Universal Life

Question 11

A(n) __________ term life policy is normally used when covering an insured’s mortgage balance.

Answer 11

decreasing

Question 12

Which of the following actions is NOT possible with a Universal Life policy?

Answer 12

Premiums may be applied as a credit against income tax

Question 13

Which of the following policies is characterized by a flexible premium and death benefit and allows the policyowner control of the investment aspect of the plan?

Answer 13

Variable universal life

Question 14

Stranger-Owned Life Insurance (STOLI) is when a person purchases life insurance only to sell to a(n):

Answer 14

third-party with no insurable interest

Question 15

Term insurance has which of the following characteristics?

Answer 15

Expires at the end of the policy period

Question 16

Which of the following Life insurance policies combine term insurance with an investment element?

Answer 16

Universal Life

Question 17

The cash value in a(n) ____________ Life policy may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors.

Answer 17

Universal

Question 18

Under a Graded Premium Whole Life policy,

Answer 18

the premium increases each year during the early years of the contract and remains the same after that time

Question 19

What does a Face Amount Plus Cash Value Policy pay upon the insured’s death?

Answer 19

Face amount plus the policy’s cash value

Question 20

A policy that becomes a Modified Endowment Contract (MEC):

Answer 20

will lose many of its tax advantages

Question 21

Credit Life insurance is:

Answer 21

issued in an amount not to exceed the amount of the loan

Question 22

Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?

Answer 22

Variable Life

Question 23

Life insurance that covers an insured’s whole life with level premiums paid over a limited time is called:

Answer 23

Limited Pay Life

Question 24

What type of life policy covers two lives and pays the face amount after the first one dies?

Answer 24

Joint Life Policy

Question 25

K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?

Answer 25

Modified Whole Life

Question 26

What type of life policy covers two people and pays upon the death of the last insured?

Answer 26

Survivorship

Question 27

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 27

20-Pay Life accumulates cash value faster than Straight Life

Question 28

S is covered by a whole life policy. Which insurance product can cover his children?

Answer 28

Child term rider

Question 29

What advantage does the renewability feature give to a term policy?

Answer 29

The insured may extend the coverage period

Question 30

Which of these Nonforfeiture Options continue a build-up of cash value?

Answer 30

Reduced Paid-Up

Question 31

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

Answer 31

Inability of the insured to perform more than 2 Activities of Daily Living (ADL's)

Question 32

A Whole Life insurance policyowner does NOT have the right to

Answer 32

change the grace period

Question 33

Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE?

Answer 33

Evidence of insurability is required when the option is exercised

Question 34

All of these statements about the Waiver of Premium provision are correct, EXCEPT:

Answer 34

Insured must be eligible for Social Security disability for claim to be accepted

Question 35

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 35

Entire Contract Provision

Question 36

An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?

Answer 36

Full face amount minus any past due premiums

Question 37

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

Answer 37

Child

Question 38

A Nonforfeiture clause gives the policyowner

Answer 38

guaranteed values even if the policy has lapsed

Question 39

D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive?

Answer 39

The full face amount

Question 40

B recently died and was insured with a life insurance policy for over five years. During the claims process, the insurer discovered that B had understated his age by 5 years at the time of application. In this situation, the insurer will

Answer 40

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

Question 41

Variable Whole Life Insurance can be described as:

Answer 41

both an insurance and securities product

Question 42

What benefit does the Payor clause on a Juvenile Life policy provide?

Answer 42

Premiums are waived if payor becomes disabled

Question 43

N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot?

Answer 43

Exclusion

Question 44

The __________ has the right to change a life insurance policy's beneficiary.

Answer 44

policyowner

Question 45

The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called a(n):

Answer 45

Insuring agreement

Question 46

What action can a policyowner take if an application for a bank loan requires collateral?

Answer 46

Assign policy ownership to the bank

Question 47

The Automatic Premium Loan provision is designed to:

Answer 47

avoid a policy lapse

Question 48

Which statement is TRUE in regards to a policy loan?

Answer 48

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

Question 49

A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?

Answer 49

Waiver of Premium