Life Insurance Policy Provisions Quiz Questions Flashcards
Which clause contains the basic promise of the life insurance company to pay a specified sum of money to a beneficiary upon the death of the insured?
- Consideration Clause
- Insuring Clause
- Policy Loan Clause
- Payment Clause
Insuring Clause
Which clause identifies the components of a contract?
- Consideration Clause
- Insuring Clause
- Entire Contract Clause
- Payment Clause
Entire Contract Clause
Steve is the beneficiary on his spouse’s life insurance policy. When they divorce, his spouse cannot remove him as a beneficiary on the policy without written permission because
- Steve is a revocable beneficiary
- Most states require the beneficiary’s written consent
- Steve is an assigned beneficiary
- Steve is an irrevocable beneficiary
Steve is an irrevocable beneficiary
Ginny is a revocable primary beneficiary on her mother’s life insurance policy. Which of the following statements is TRUE?
- Ginny can probably assign her rights in the policy as collateral on a loan
- Ginny will receive benefits before any other beneficiary upon her monther’s death
- Ginny will receive benefits only if another beneficiary has died before her mother has
- Ginny’s mother may not change the beneficiary without Ginny’s permission
Ginny will receive benefits before any other beneficiary upon her m other’s death
An insured & the primary beneficiary died in a car accident. Which of the following states that the primary beneficiary died first unless there is evidence of the contrary?
- The facility of payment provision
- The Uniform Simultaneous Act
- The common disaster provisions
- The spendthrift provision
The Uniform Simultaneous Act
The aviation exclusion elimination coverage for all of the following EXCEPT
- a commercial flight
- a private flight
- military pilots and crew
- test pilots
A commercial flight
Roberta is the insured in a $30,000 life insurance policy for which she pays an annual premium of $700. There is an outstanding policy loan of $2,500. Her last premium due has not been paid, and she dies during the grace period. How much will he beneficiary receive?
$26,800
To have an individual life insurance policy reinstated, a person must do all of the following except
- provide satisfactory evidence of instability, if required
- agree to a new policy without another reinstatement period
- make back payments of premiums
- pay any other indebtedness owed to the insurer
agree to a new policy without another reinstatement period
Which of the following statements pertaining to the reinstatement of a life insurance policy is CORRECT?
- Reinstatement is only available to policy owners who have intentionally surrendered their life policies
- The insurance company will make all beneficiaries prove insurability before reinstatement
- A new contestability period is renewed with a reinstated policy
- When reinstating a policy, the insurer will change the premium based on the insured’s attained age
A new contestability period is renewed with a reinstated policy
An exchange of value is necessary to form a valid contract. What is the legal term that means something of value?
- Endorsement
- Premium
- Consideration
- Application
- Consideration
Which of the following statements about the reinstatement of individual life insurance policies is NOT correct?
- To reinstate a policy, the insured is never required to provide evidence of insurability
- Policies cannot be reinstated if they were surrendered for their cash surrender value
- The insured must make back payment of premiums and pay any other indebtedness
- Policies can be reinstated within 3 years from the date of premium default
- To reinstate a policy, the insured is never required to provide evidence of insurability
The free look, or right to examine provision allows a policy owner the right to review & then return a policy for a full refund within no less than how many days?
- 10 days
- 25 days
- 60 days
- 45 days
- 10 days
An individual life insurance policy must contain all of the following provisions EXCEPT?
- accelerated benefit
- entire contract
- inconsistability
- free-look
- accelerated benefit
An assignment in which the assignee receives full control over the policy is called
- a guaranteed assignment
- an absolute assignment
- a collateral assignment
- a revocable assignment
an absolute assignment
Tina’s grandparents purchased a $250k universal life insurance with the intent to permanently transfer ownership to her when she turns 21. What is the transfer of rights known as?
- an absolute assignment
- absolute change of beneficiary
- a collateral assignment
- ownership rights
an absolute assignment or pernament assignment
If a life insurance policy lapses for nonpayment, within how many years form the date of the premium default may the policy be reinstated?
- 2 years
- 3 years
- 5 years
- 4 years
3 years
All of the following are required provisions in life insurance policies EXCEPT
- misstatements of age provision
- a 1-month grace period for payment of premiums after the first payment has been made
- a reinstatement provision
- a replacement provision
a replacement provision
What are 2 types of assignment of rights to another in a life insurance policy?
- Whole & pieces
- Collateral & absolute (aka as permanent)
- dividend & cash value
- direct & participating
*Collateral & absolute (aka as permanent)
Which of the following statements pertaining to the reinstatement of a life insurance policy is not correct?
- When reinstating a policy, the insurer must charge the policy owner for interest premium loans.
- A new contestable period becomes effective in a reinstated policy
- A suicide exclusion period is renewed with a reinstated policy
- When reinstating a policy, the insurer must charge the policy owner for past-due premiums
A suicide exclusion period is renewed with a reinstated policy
Which of the following statements pertaining to life insurance policy assignments NOT correct?
- All back premiums must be paid
- The insured may need to provide evidence of insurability
- Any outstanding policy loan must be repaid
- The cash surrender value must be forfeited to the insurer
- The cash surrender value must be forfeited to the insurer
Death benefits paid out to a beneficiary may NOT be protected from the insured’s creditors
- if they are paid out installments
- if the beneficiary is the insured’s estate
- if they are paid out in a lump sum
- if they are held in a trust by the insurer
- if the beneficiary is the insured’s estate
Which of the following statements pertaining to inspection reports & credit reports on the life insurance applicants is NOT correct?
- Consumers must be notified & give their consent to an inspection report
- Information contained in inspection reports is usually obtained through interviews with employers, neighbors & associates of the proposed insurer
- Applicants with unfavorable credit ratings, a history of moral hazard, or both are poor prospects for life insurance
- Inspection reports only require consumer notification when they are conducted
Inspection reports only require consumer notification when they are conducted
Winston, the insured, & his spouse, Irene, his sole beneficiary, both died in a hotel fire. Hospital physicians witnessed that Irene lived at least 2 hours longer than Winston. The life policy had no common disaster clause. Which of the following will receive the policy proceeds?
- Irene’s Estate
- The state
- Winston’s secondary beneficiary
- Winston’s Estate
Irene’s Estate
Which of the following statements pertaining to sources of insurability information is CORRECT?
- The insurance agent completes the medical report on a life insurance applicant
- An insurer cannot use an unfavorable credit report to reject an applicant for insurance
- Special questionnaires are used to obtain additional information when an extra hazard or risk may be involved
- When conducting an inspection report, an investigator cannot interview an individual who actually knows the applicant
Special questionnaires are used to obtain additional information when an extra hazard or risk may be involved
Which provision sets forth the insurer’s basic promise to pay benefits upon the insured’s death?
- Reinstatement provision
- Insuring Clause
- Consideration Clauses
- Settlement options provision
- Insuring Clause
Which clause identifies the fact that the policy owner must pay something of value for the insurer’s promise to pay the benefit?
- Consideration clause
- Insuring Clause
- entire Contract clause
- Payment Clause
- Consideration clause
All of the following are designations of beneficiaries EXCEPT
- Secondary beneficiary
- Primary beneficiary
- Tertiary beneficiary
- Final beneficiary
- Final beneficiary
Which of the following is allowed when policy proceeds are being paid through a spendthrift clause>
- The proceeds are paid directly the beneficiary in monthly installments
- The proceeds may be transferred directly to a creditor by the beneficiary
- The beneficiary may borrow against the strength of the proceeds
- The proceeds my be commuted by the beneficiary to receive the present value of future payments
- The proceeds are paid directly the beneficiary in monthly installments
Which of the following is allowed when policy proceeds are being paid through a spendthrift clause>
- The proceeds are paid directly the beneficiary in monthly installments
- The proceeds may be transferred directly to a creditor by the beneficiary
- The beneficiary may borrow against the strength of the proceeds
- The proceeds may be commuted by the beneficiary to receive the present value of future payments
- The proceeds are paid directly the beneficiary in monthly installments
Carl purchased a life insurance policy when he was 44. the insurer accidentally recorded his age as 42. When the accident is discovered in a review of the files 5 years later
- the policy will be canceled because of misrepresentation
- the policy will not change because the incontestable period will have passed
- the coverage will be reduced because the premium is lower than it should be
- the coverage will be raised because the premium is higher than it should have been
- the coverage will be reduced because the premium is lower than it should be
All of the following can be named beneficiaries in a life insurance contract eXCEPT
- the insured’s estate
- a trust
- a minor
- the insured
- the insured
If the named beneficiaries cannot be found, under the facility of payment provision the insurer may
- Select a a beneficiary
- retain the proceeds
- pay a mortgage company directly
- pay proceeds directly to minor
- Select a a beneficiary
The incontestability provision is usually in effect after
- 1 year
- 2 years
- 4 years
- 5 years
- 2 years
John leaves his $300k estate to his 3 children to split equally according to a per capita distribution. One of his children dies before John does. Upon john’s death, which of the following statements is TRUE?
- the proceeds are split 3 ways between the remaining children & John’s estate
- the proceeds are split 2 ways between the remaining children only
- The proceeds are split 3 ways between the remaining children & the beneficiary of the deceased child’s estate
- the proceeds are split 4 ways between the remaining children, John’s estate, and the deceased child’s estate.
- the proceeds are split 2 ways between the remaining children only
When Tom dies, Rosemary receives the death benefit. If Rosemary had died before Tom, George would have received the benefit. Which of the following statements is TRUE?
- Rosemary is the primary beneficiary, and George is the contingent beneficiary
- Tom is the primary beneficiary & Rosemary is the contingent beneficiary
- Rosemary is the contingent beneficiary, & George is the primary beneficiary
- George is the contingent beneficiary & Rosemary is the tertiary beneficiary
Rosemary is the primary beneficiary, and George is the contingent beneficiary
John leaves his $300k estate to his 3 children to split equally according to a per stripes distribution. One of his children dies before John does. Upon John’s death, which of the following is TRUE?
- The proceeds are split 3 ways between the remaining children & John’s estate.
- The proceeds are split 3 ways between the remaining children only
- The proceeds are split 3 ways between the remaining children & the beneficiary of the deceased child’s estate.
- The proceeds are split 4 ways between the remaining children. John’s estate, & the deceased child’s estate.
- The proceeds are split 3 ways between the remaining children & the beneficiary of the deceased child’s estate.
Which of the following statements pertaining to the insuring clause in a life insurance policy is NOT correct?
- It names the beneficiary
- It gives the effective date of coverage
- It specifies the length of the grace period
- It defines the responsibilities of the insurer
- It specifies the length of the grace period
All of the following statements regarding the insuring agreement are true except?
- the clause includes the death benefit amount
- the agent or producer must sign the clause *
- the insuring agreement is usually found on the first page
- the beneficiary is named in the insuring agreement
- the agent or producer must sign the clause
The purpose of the common disaster provision is to
- protect the interests of the primary beneficiary
- provide benefits in case of a common disaster, such as a flood
- protect the interest of the contingent beneficiary
- provide benefits to the primary beneficiary’s heirs
- protect the interest of the contingent beneficiary
the death benefit proceeds of a life insurance policy are protected from the beneficiary’s creditors unless
- they are paid to a contingent beneficiary
- they are paid in installments
- the are held in a trust by the insurer
- they are paid out in a lump sum
- they are paid out in a lump sum
Individual life insurance policies must include all of the following provisions EXCEPT
- an incontestibility provision
- the entire contract provision
- a conversion provision
- a misstatement of age provision
a conversion provision
Which of the following best describes the basic purpose of the facility-of-payment clause found in some life insurance policies?
- It authorizes the insurer to designate the payee of the life insurance death benefits if the designated beneficiary cannot be located
- It requires the insurer to distribute the death benefit in a settlement option that it believes is best suited for the beneficiary’s needs
- It authorizes the insurer tp change the beneficiary designation if the current beneficiary does not have an insurable interest in the insured
- it authorizes the insurer to distribute the life death benefit as a lump-sum cash payment even if the owner selected a different option if the death benefit is below a specified unit
It authorizes the insurer to designate the payee of the life insurance death benefits if the designated beneficiary cannot be located
