Life 2 Flashcards
Which is TRUE about the cash surrender nonforfeiture option?
a) Funds exceeding the premium paid are taxable as ordinary income.
b) After the cash surrender, the insured is covered for a grace period of one month.
c) The policy remains active for some time after the policyholder opts for cash surrender.
d) The policyholder receives the original cash value of the policy.
Funds exceeding the premium paid are taxable as ordinary income.
The insurers surrender the policy at its current cash value. Only any excess of value is taxable as income. Once the policyholder opts for cash surrender, the policy is immediately inactive.
The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the
a) Insuring clause.
b) Misstatement of Age clause.
c) Incontestability clause.
d) Reinstatement clause.
Incontestability clause.
If an insurer wishes to contest any statements on an application, they must do so within the first two years.
An insured purchased a life insurance policy on his life naming his wife as primary beneficiary, and his daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?
a) If the insured died from accidental means
b) If the primary beneficiary predeceased the insured
c) When the insured dies, the primary and contingent beneficiaries share death benefits equally.
d) With the primary beneficiary’s written consent
If the primary beneficiary predeceased the insured
The daughter, as contingent beneficiary, would need to outlive the insured and primary beneficiary.
Which of the following is TRUE for both equity indexed annuities and fixed annuities?
a) Both are considered to be more risky than variable annuities.
b) They invest on a conservative basis.
c) They have a guaranteed minimum interest rate.
d) They are both tied to an equity index.
I have a guarantee minimum interest rate
While equity indexed annuities earn higher interest rates than fixed annuities, both types of annuities guarantee a specific minimum interest rate.
All of the following are true about variable products EXCEPT
a) Policyowners bear the investment risk.
b) The premiums are invested in the insurer’s general account.
c) The minimum death benefit is guaranteed.
d) The cash value is not guaranteed.
The premiums are invested in the insurer’s general account.
Insurers selling variable products invest their customer’s monies in a separate account, which is very similar to a mutual fund. Since there is no guaranteed rate of return, customers must bear the investment risk.
The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the
a) One-year term option.
b) Paid-up option.
c) Accelerated endowment.
d) Paid-up additions.
One-year term option.
The dividend is utilized to purchase one-year term insurance.
What is the benefit of choosing extended term as a nonforfeiture option?
a) It can be converted to a fixed annuity.
b) It has the highest amount of insurance protection.
c) It matures at age 100.
d) It allows for coverage to continue beyond maturity date.
It has the highest amount of insurance protection.
Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy. The duration of the new term coverage lasts for as long a period as the amount of cash value will purchase.
