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Life Insurance Exam > Life Insurance Policy Provisions Quiz Questions > Flashcards

Life Insurance Policy Provisions Quiz Questions Flashcards

1
Q

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
A

Insuring Clause

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2
Q

Which clause identifies the components of a contract?

  • Consideration Clause
  • Insuring Clause
  • Entire Contract Clause
  • Payment Clause
A

Entire Contract Clause

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3
Q

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
A

Steve is an irrevocable beneficiary

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4
Q

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
A

Ginny will receive benefits before any other beneficiary upon her m other’s death

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5
Q

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
A

The Uniform Simultaneous Act

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6
Q

The aviation exclusion elimination coverage for all of the following EXCEPT

  • a commercial flight
  • a private flight
  • military pilots and crew
  • test pilots
A

A commercial flight

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7
Q

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?

A

$26,800

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8
Q

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
A

agree to a new policy without another reinstatement period

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9
Q

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

A new contestability period is renewed with a reinstated policy

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10
Q

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
A
  • Consideration
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11
Q

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
A
  • To reinstate a policy, the insured is never required to provide evidence of insurability
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12
Q

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
A
  • 10 days
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13
Q

An individual life insurance policy must contain all of the following provisions EXCEPT?

  • accelerated benefit
  • entire contract
  • inconsistability
  • free-look
A
  • accelerated benefit
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14
Q

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
A

an absolute assignment

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15
Q

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
A

an absolute assignment or pernament assignment

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16
Q

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
A

3 years

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17
Q

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

a replacement provision

18
Q

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
A

*Collateral & absolute (aka as permanent)

19
Q

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

A suicide exclusion period is renewed with a reinstated policy

20
Q

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
A
  • The cash surrender value must be forfeited to the insurer
21
Q

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
A
  • if the beneficiary is the insured’s estate
22
Q

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
A

Inspection reports only require consumer notification when they are conducted

23
Q

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
A

Irene’s Estate

24
Q

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
A

Special questionnaires are used to obtain additional information when an extra hazard or risk may be involved

25
Q

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
A
  • Insuring Clause
26
Q

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
A
  • Consideration clause
27
Q

All of the following are designations of beneficiaries EXCEPT

  • Secondary beneficiary
  • Primary beneficiary
  • Tertiary beneficiary
  • Final beneficiary
A
  • Final beneficiary
28
Q

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
A
  • The proceeds are paid directly the beneficiary in monthly installments
29
Q

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
A
  • The proceeds are paid directly the beneficiary in monthly installments
30
Q

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
A
  • the coverage will be reduced because the premium is lower than it should be
31
Q

All of the following can be named beneficiaries in a life insurance contract eXCEPT

  • the insured’s estate
  • a trust
  • a minor
  • the insured
A
  • the insured
32
Q

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
A
  • Select a a beneficiary
33
Q

The incontestability provision is usually in effect after

  • 1 year
  • 2 years
  • 4 years
  • 5 years
A
  • 2 years
34
Q

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.
A
  • the proceeds are split 2 ways between the remaining children only
35
Q

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
A

Rosemary is the primary beneficiary, and George is the contingent beneficiary

36
Q

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.
A
  • The proceeds are split 3 ways between the remaining children & the beneficiary of the deceased child’s estate.
37
Q

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
A
  • It specifies the length of the grace period
38
Q

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
A
  • the agent or producer must sign the clause
39
Q

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
A
  • protect the interest of the contingent beneficiary
40
Q

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
A
  • they are paid out in a lump sum
41
Q

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

a conversion provision

42
Q

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
A

It authorizes the insurer to designate the payee of the life insurance death benefits if the designated beneficiary cannot be located

Life Insurance Exam (13 decks)

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