Life Insurance Policy Options Quiz Questions

Question 1

Heath has chosen to receive the payout form his wife’s insurance policy in such a way that he will have an income for the remainder of his life, regardless of how long he lives. Heath has selected the

• interest-only option
• foxed-period options
• fixed-amount option
• life-income option

Answer 1

life-income option

Question 2

Jim has selected to receive only the interest from his mother’s life insurance policy. When Jim dies, his children will receive the lump-sum benefit in addition to the benefits of his l life insurance policy. Jim has selected the

• interest-only option
• fixed-period option
• fixed-amount option
• life-income option

Answer 2

interest-only option

Question 3

Walter is the beneficiary of his mother’s life insurance policy. He wants to make sure the proceeds will last not only as long as he lives but as long as his wife is alive. What did Walter select?

• straight life income option
• refund annuity option
• life income certain option
• joint and survivor ship life income option

Answer 3

Joint and Survivor ship life income option

Question 4

Of all the life income options, which settlement option has the largest payment?

• life with period certain
• life-only
• life with refund certain
• joint-and-survivor life

Answer 4

Life only

Question 5

Which of the following is not a factor In determining the amount the beneficiary will receive each time a payment is made under the fixed amount option?

• the specified amount of each payment
• the principal amount
• the interest earned on the principle
• The capital amount

Answer 5

The capital amount

Question 6

Carmen has selected to receive $10,000 per month until the principal and interest on her husband’s life insurance policy have been paid out. Carmen has selected

• interest-only option
• fixed-period option
• fixed amount option
• life-income option

Answer 6

fixed-amount oprion

Question 7

Which settlement option pays only the earnings on a death benefit to a beneficiary?

• Life income
• Fixed amount
• Fixed period
• Interest only

Answer 7

Interest only

Question 8

Emily has chosen to receive the payout from her husband’s life insurance policy so that she will receive an income for the next 15 years. At the end of time, the entire proceeds from the policy will have been paid out. Emily has selected the

• interest only option
• fixed-period option
• fixed-amount option
• life-income option

Answer 8

Fixed-period option

Question 9

Which of the following statement about paid-up additions is True?

• The dividends are used to purchase additional insurance protection
• The additional protection is almost always restricted to term insurance
• dividends can be guaranteed to be paid every year
• a dividend can be left with the insurer in a savings account to earn interest

Answer 9

dividends can be guaranteed to be paid every year

Question 10

Cash surrender, reduced paid up insurance, and extended team insurance are all examples of

• non forfeiture options
• dividend options
• paid up additions
• paid up insurance

Answer 10

non forfeiture options

Question 11

All of the following statements regarding the life only settlement options are correct EXPECT

• payments are guaranteed to continue for as long as the beneficiary lives
• payments continue even if the beneficiary dies shortly after payment begins
• life expectancy is a factor used in calculating the size of the payment
• life income payments are smaller for younger beneficiaries

Answer 11

payments continue even if the beneficiary dies shortly after payment begins

Question 12

Thomas has chosen to receive the settlement form his wife’s $100,000 life insurance policy according to the life income option. Under the option he chooses, he will receive an income for his life and his daughter will receive payments if he dies before receiving the $100,000 in income. Thomas has selected a

• straight line income option
• refund annuity option
• life income certain option
• joint and survivor ship life income option

Answer 12

refund annuity option

Question 13

Which of the following is NOT a factor in determining the amount the beneficiary will receive each time a payment is made under the fixed period option?

• The age of the beneficiary
• the principle amount
• the interest earned on the principal
• the length of time payments is to be made

Answer 13

The age of the beneficiary

Question 14

Which of the following statements about reduced paid-up insurance option is NOT true?

• the new policy will build cash values for the policy owner
• no further premiums need to be paid on the reduced policy - if it is paid up
• the new protection is for the same amount as the original policy
• a full sharer of expense loading is usually not included in the premium on the reduced coverage because the costs of setting up the coverage are greatly reduced

Answer 14

the new protection is for the same amount as the original policy

Question 15

The settlement option that will pay the largest amount to the beneficiary regardless of how long he lives is

• the life with refund option
• the interest-only option
• the life with period certain option
• the life only or straight life option

Answer 15

the life only or straight life option

Question 16

Tammy owns a participating whole life insurance policy for which she has elected the paid-up additions option. If the insurer declares a dividend of $500 in the current years, how will this amount be used with this dividend option?

• the insurer add $500 to the face amount to Tammy’s policy
• The insurer adds a paid-up unit of whole life insurance with a $500 face amount to Tammy’s policy
• the insurers use the $500 as if it were a single premium to purchase a unit of paid-up whole life insurance based on Tammy’s attained age
• The insurer adds a paid-up unit of whole life insurance with a cash value that is equal to $500

Answer 16

the insurers use the $500 as if it were a single premium to purchase a unit of paid-up whole life insurance based on Tammy’s attained age

Question 17

Which of following period certain income options would call for the highest payment rate per $1,000 of life policy proceeds?

• 15-year period certain
• 20-year period certain
• 5-year period certain
• 10-year period certain

Answer 17

• 5-year period certain

Question 18

Suppose Max wants to arrange the distribution of his life insurance proceeds so that his spouse, as beneficiary, will receive monthly payments for as long as she lives. Which of the following settlement options will meet this need?

• Fixed-amount option
• Life income option
• Fixed-period option
• Interest-only option

Answer 18

• Life income option

Question 19

Paul, age 62, is applying for a universal life insurance policy and wants to arrange the beneficiary designation in such a way as to use the proceeds to provide lifetime income to his spouse, Marsha. Which of the following settlement options is best suited for this purpose?

• The insurer can distribute the proceeds in a lump-sum payment, deposit the money in a bank account, and then set up a periodic distribution plan for Marsha
• Paul, as the owner, can pick life income as the settlement option his spouse must take when dies. This option will give Marsha a monthly income she cannot outlive.
• Paul can select the fixed option period option & base the distribution period on Marsha’s life expectancy at the time of Pauls’s death
• Paul can leave the proceeds with the insurance company to accumulate & distribute the interest to Marsha

Answer 19

Paul, as the owner, can pick life income as the settlement option his spouse must take when dies. This option will give Marsha a monthly income she cannot outlive.

Question 20

Under a fixed-period life insurance settlement option, excess interest will

• shorten the payment period
• increase the size of payments
• have no effect on payments
• lengthen the payment period

Answer 20

• increase the size of payments

Question 21

Dorris & Arnold receive $450 per month under a joint & on-half survivor life insurance option. What would happen if Arnold were to die first after the payment?

• Doris would receive $450 per month as long as she lived
• The remaining proceeds would be paid to Doris in a lump sum
• Doris would have to select another settlement option
• Monthly payments of $225 would be made to Doris as long as she lived

Answer 21

Monthly payments of $225 would be made to Doris as long as she lived

Question 22

All of the following are dividend options except

• paid-up additions
• assigning dividends to pay off a mortgage
• accumulate interest
• reduced premiums

Answer 22

• assigning dividends to pay off a mortgage

Question 23

Carl & Laura receive $270 per month under a joint & 2/3 survivor life policy settlement option. What would happen if Carl died a year after payment started?

• Laura would receive $180 per month for as long as she lived
• Laura would continue to receive a monthly benefit of $270 for as long as she lived
• The balance of the proceeds would be paid to Laura in a lump sum
• Laura would receive $135 per month for as long as she lived

Answer 23

• Laura would receive $180 per month for as long as she lived

Question 24

Heather wants her $85,000 life insurance policy arranged to pay her spouse a monthly income if she dies first, but most of all of the proceeds to go to their children?

• Fixed-amount option
• Interest-only option
• Fixed-period option
• Life income option

Answer 24

Interest-only option

Question 25

Susan, the beneficiary on John's $500,000 life policy, chose life-only as her settlement option. Susan receives 5 years of settlement checks from the insurance company, totaling $150,000. How much will Susan's beneficiary receive upon her death? * Nothing, because life-only states that when the beneficiary dies, any remaining death benefit is kept by the insurance company * $350,000 minus taxes & fees * $350,000 * Susan's beneficiary will receive checks for the rest of his life

Answer 25

nterest-only option

Question 26

With a participating life insurance policy, a policy owner may do all of the following with dividends received EXCEPT * take the dividends in cash * use the dividends in cash to pay overdue premiums from previous years * allow the dividends to accumulate interest * purchase additional life insurance protection

Answer 26

use the dividends in cash to pay overdue premiums from previous years

Question 27

All of the following are standard life insurance dividend options EXCEPT * using the dividend to increase the base whole life policy's face amount * leaving the dividends with the insurer to accumulate at interest in a cash account * using the dividend to purchase a unit of paid-up whole life insurance * taking the dividend as an income tax-free cash distribution from the insurer

Answer 27

* using the dividend to increase the base whole life policy's face amount

Question 28

The privilege of accessing the cash value of an insurance policy if it is surrendered is known as the * reinstatement provision * entire contract provision * conversion privilege * nonforfeiture provision

Answer 28

nonforfeiture provision

Question 29

Lynn elects to surrender her whole life policy for a reduced paid-up policy. The cash value of her new policy will * continue to increase * decrease gradually * reduce immediately to $0 * remain the same in the old policy

Answer 29

* continue to increase

Question 30

Which of the following statements regarding the paid-up additions life insurance policy dividend option is NOT correct? * The amount of paid-up coverage acquired is based on the insured's attained age at the time the dividend is declared * A paid-up addition increases the policy's total cash value as its death benefit * The paid-up additions are only available to insureds that remain insurable * Paid-up additions consist of permanent life insurance of the same type as the base policy

Answer 30

The paid-up additions are only available to insureds that remain insurable

Question 31

Which of the following statements best describes the nature of cash value l loan? * It is a financial transaction in which the insurer loans the money & attaches a comparable portion of the cash value as collateral * It is a financial transaction in which the cash value is reduced amount of the loan * It is a financial transaction in which future growth of the cash value is suspended until the loan amount plus interest is recovered * It is a financial transaction in which the cash value is unaffected but the face amount is reduced by the amount of the loan plus interest

Answer 31

* It is a financial transaction in which the cash value is unaffected but the face amount is reduced by the amount of the loan plus interest

Question 32

What settlement option is designed to pay out a specified amount of income at regular intervals over an unspecified period of time? * fixed-amount option * life income option * interest-only option * fixed-period option

Answer 32

* fixed-amount option

Question 33

Which of the following statements regarding policy dividends is CORRECT? * They are the difference between the gross premium charged & the actual experience of the insurer * They are not available to insureds after a specified age, such as 60 * They are issued on nonparticipating policies * Though they may vary from year to year, they are guaranteed to be paid each year

Answer 33

* They are the difference between the gross premium charged & the actual experience of the insurer

Question 34

Which of the following options is designed to protect the policy owner should the policy be in danger of lapsing for nonpayment of premiums? * Premium exclusion' * Waiver of Premium * Guaranteed insurability * Automatic premium loan

Answer 34

* Automatic premium loan

Question 35

the privilege of accessing the cash value of an insurance policy if it is surrendered is known as the * conversion privilege * nonforfeiture provision * reinstatement provision * entire contract provision

Answer 35

nonforfeiture provision

Question 36

Under a fixed-period life insurance settlement option, excess interest will * have no effect on payments * lengthen the payment period * shorten the payment period * increase the size of payments

Answer 36

* increase the size of payments