Question 1

Which of the following statements about the waiver-of-premium provision in life insurance is true?

Accepted Answer

A)   Because the probability of becoming disabled exceeds the probability of premature death, the cost to include this provision is usually prohibitive at younger ages.
B)   Premiums are usually waived if the insured becomes partially disabled.
C)   Life insurance protection continues in force during a period of disability, but dividends cease and cash values are reduced.
D)   The disability must occur before a stated age, such as 65, for premiums to be waived.E) A) and D)
F) A) and C)

Question 2

All of the following are requirements that must be satisfied before premiums are waived under a waiver-of-premium provision EXCEPT

Accepted Answer

A)   The insured must furnish proof of disability to the insurer.
B)   The insured must be disabled before some specified age, such as age 60 or 65.
C)   The insured must satisfy the definition of disability.
D)   The insured must satisfy a 2-year waiting period.E) A) and B)
F) B) and C)

Question 3

Which of the following statements about accelerated death benefits riders is (are)  true?
I.The benefit paid is usually less than the full face amount.
II.Several different medical conditions may trigger the payment of benefits.

Accepted Answer

A)   I only
B)   II only
C)   both I and II
D)   neither I nor IIE) A) and B)
F) None of the above

Question 4

The practice of buying the life insurance policy of a terminally ill insured at a discount is referred to as a

Accepted Answer

A)   collateral assignment.
B)   viatical settlement.
C)   catastrophic illness conversion.
D)   grace period transaction.E) A) and B)
F) A) and C)

Question 5

Which of the following statements about dividend options is (are)  true?
I.The interest on dividends left to accumulate with the insurer is not considered to be taxable income.
II.Paid-up additions are additional units of whole life insurance.

Accepted Answer

A)   I only
B)   II only
C)   both I and II
D)   neither I nor IIE) C) and D)
F) A) and B)

Question 6

Which of the following statements about life insurance settlement options is true?

Accepted Answer

A)   Under the fixed period option, the beneficiary normally has the right to make partial withdrawals in case of emergency.
B)   Under the fixed period option, any remaining proceeds revert to the insurer if the beneficiary dies before the end of the fixed period.
C)   Under the fixed amount option, the beneficiary can be given the right to increase or decrease the fixed amount.
D)   Under the fixed amount option, any interest credited in excess of the guaranteed rate increases the amount of each periodic payment.E) A) and D)
F) B) and C) C

Question 7

What major feature distinguishes a participating policy from a nonparticipating policy?

Accepted Answer

A)   the availability of a waiver-of-premium provision
B)   the existence of settlement options
C)   the payment of dividends
D)   the method by which beneficiaries can be namedE) C) and D)
F) B) and C)

Question 8

Which of the following would be a valid reason for an insurer to contest a policy after the contestable period has ended?

Accepted Answer

A)   The policyholder made a material misrepresentation in the application process.
B)   The insurer's loss ratio is running higher than the insurer anticipated.
C)   The applicant had someone else take the medical examination required for policy approval for her.
D)   The policyholder concealed a material fact at the time of application.E) None of the above
F) A) and C)

Question 9

Which of the following is a common dividend option found in a participating life insurance policy?

Accepted Answer

A)   reduced paid-up insurance
B)   fixed period
C)   paid-up additions
D)   life incomeE) B) and C)
F) C) and D) C

Question 10

Disadvantages of life insurance settlement options include which of the following?
I.Higher yields can often be obtained elsewhere.
II.Life income options have limited usefulness at younger ages.

Accepted Answer

A)   I only
B)   II only
C)   both I and II
D)   neither I nor IIE) None of the above
F) A) and B) C

Question 11

Lionel purchased a $200,000 ordinary life insurance policy when he was 25 years old and had significant life insurance needs. Now Lionel is 50. His mortgage is almost paid-off and his children have left home and are financially independent. Lionel no longer wants to pay premiums, but he would like to have some permanent life insurance in force. Which nonforfeiture option could Lionel employ to meet these objectives?

Accepted Answer

A)   cash value
B)   reduced paid-up insurance
C)   paid-up additions
D)   extended term insuranceE) A) and D)
F) B) and C)

Question 12

A life insurance policyholder may no longer need life insurance. Such a policyholder may sell the policy to a third party for more than its cash value. The purchaser becomes the new beneficiary and is responsible for subsequent premium payments. Such a financial transaction is called a(n)

Accepted Answer

A)   collateral assignment.
B)   accelerated death benefits rider.
C)   absolute assignment.
D)   life settlement.E) B) and D)
F) B) and C)

Question 13

Reasons for NOT purchasing an accidental death benefit rider include which of the following?
I.Most people die as a result of a disease rather than from an accident.
II.The economic value of a human life is not increased if death occurs because of an accident.

Accepted Answer

A)   I only
B)   II only
C)   both I and II
D)   neither I nor IIE) B) and D)
F) All of the above

Question 14

Which of the following statements about the change of plan provision in a life insurance contract is (are)  true?
I.A change to a lower premium policy results in a refund of the difference in the cash values of the two policies.
II.A change to a higher premium policy requires evidence of insurability.

Accepted Answer

A)   I only
B)   II only
C)   both I and II
D)   neither I nor IIE) A) and B)
F) A) and C)

Question 15

Life insurance policy proceeds can be paid to a trustee upon the death of the insured. All of the following statements concerning payment of proceeds to a trustee are true EXCEPT

Accepted Answer

A)   Use of a trustee provides flexibility with regard to the timing and amount of the payments.
B)   Trustees are often used when the beneficiary is a minor child or an adult with diminished mental capacity.
C)   The trustee is not permitted to accept a fee for rendering services.
D)   The trustee does not guarantee investment results.E) A) and B)
F) C) and D)

Question 16

Which of the following statements about the assignment of a life insurance policy is (are)  true?
I.Under a collateral assignment, the policyowner assigns a life insurance policy to secure a loan.
II.Under an absolute assignment, only limited ownership rights in a policy are transferred.

Accepted Answer

A)   I only
B)   II only
C)   both I and II
D)   neither I nor IIE) None of the above
F) B) and D)

Question 17

Which of the following statements about a typical accidental death benefit rider is (are)  true?
I.Accidental injury must be the cause of death for the increased benefit to be paid.
II.The accidental death must occur prior to some specified age for the increased benefit to be paid.

Accepted Answer

A)   I only
B)   II only
C)   both I and II
D)   neither I nor IIE) B) and D)
F) B) and C)

Question 18

Which of the following statements about the grace period in a whole life insurance contract is (are)  true?
I.The purpose of the grace period is to prevent the policy from lapsing by giving the policyowner additional time to pay an overdue premium.
II.If the insured dies during the grace period, the death benefit is reduced by 50 percent.

Accepted Answer

A)   I only
B)   II only
C)   both I and II
D)   neither I nor IIE) C) and D)
F) None of the above

Question 19

Which of the following statements about nonforfeiture options found in life insurance policies is true?

Accepted Answer

A)   Under the reduced paid-up option, the paid-up policy is term insurance.
B)   Under the extended term option, the amount of term insurance is less than the face value of the surrendered cash value policy.
C)   Under the reduced paid-up option, no additional premiums must be paid.
D)   Unless the policyowner has selected another nonforfeiture option, the cash value option goes into effect automatically.E) B) and C)
F) A) and D)

Question 20

Cal purchased a whole life policy 6 years ago. The policy requires annual premium payments. Cal forgot to pay the premium that was due 2 weeks ago. He wonders if his life insurance is still in force. Which life insurance policy provision is designed to keep the policy in force for a short time even if the premium payment is late?

Accepted Answer

A)   waiting period
B)   grace period
C)   guaranteed purchase option
D)   reinstatement clauseE) All of the above
F) A) and B)

Exam 12: Life Insurance Contractual Provisions

Which of the following statements about the waiver-of-premium provision in life insurance is true?

Correct Answer
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All of the following are requirements that must be satisfied before premiums are waived under a waiver-of-premium provision EXCEPT

Correct Answer
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Which of the following statements about accelerated death benefits riders is (are) true? I.The benefit paid is usually less than the full face amount. II.Several different medical conditions may trigger the payment of benefits.

Correct Answer
verified

The practice of buying the life insurance policy of a terminally ill insured at a discount is referred to as a

Correct Answer
verified

Which of the following statements about dividend options is (are) true? I.The interest on dividends left to accumulate with the insurer is not considered to be taxable income. II.Paid-up additions are additional units of whole life insurance.

Correct Answer
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Which of the following statements about life insurance settlement options is true?

Correct Answer
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C

What major feature distinguishes a participating policy from a nonparticipating policy?

Correct Answer
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Which of the following would be a valid reason for an insurer to contest a policy after the contestable period has ended?

Correct Answer
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Which of the following is a common dividend option found in a participating life insurance policy?

Correct Answer
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C

Disadvantages of life insurance settlement options include which of the following? I.Higher yields can often be obtained elsewhere. II.Life income options have limited usefulness at younger ages.

Correct Answer
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C

Correct Answer
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A life insurance policyholder may no longer need life insurance. Such a policyholder may sell the policy to a third party for more than its cash value. The purchaser becomes the new beneficiary and is responsible for subsequent premium payments. Such a financial transaction is called a(n)

Correct Answer
verified

Reasons for NOT purchasing an accidental death benefit rider include which of the following? I.Most people die as a result of a disease rather than from an accident. II.The economic value of a human life is not increased if death occurs because of an accident.

Correct Answer
verified

Correct Answer
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Life insurance policy proceeds can be paid to a trustee upon the death of the insured. All of the following statements concerning payment of proceeds to a trustee are true EXCEPT

Correct Answer
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Which of the following statements about the assignment of a life insurance policy is (are) true? I.Under a collateral assignment, the policyowner assigns a life insurance policy to secure a loan. II.Under an absolute assignment, only limited ownership rights in a policy are transferred.

Correct Answer
verified

Which of the following statements about a typical accidental death benefit rider is (are) true? I.Accidental injury must be the cause of death for the increased benefit to be paid. II.The accidental death must occur prior to some specified age for the increased benefit to be paid.

Correct Answer
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Correct Answer
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Which of the following statements about nonforfeiture options found in life insurance policies is true?

Correct Answer
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Correct Answer
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Exam 12: Life Insurance Contractual Provisions

Which of the following statements about the waiver-of-premium provision in life insurance is true?

Correct AnswerverifiedShow Answer

All of the following are requirements that must be satisfied before premiums are waived under a waiver-of-premium provision EXCEPT

Correct AnswerverifiedShow Answer

Which of the following statements about accelerated death benefits riders is (are) true? I.The benefit paid is usually less than the full face amount. II.Several different medical conditions may trigger the payment of benefits.

Correct AnswerverifiedShow Answer

The practice of buying the life insurance policy of a terminally ill insured at a discount is referred to as a

Correct AnswerverifiedShow Answer

Which of the following statements about dividend options is (are) true? I.The interest on dividends left to accumulate with the insurer is not considered to be taxable income. II.Paid-up additions are additional units of whole life insurance.

Correct AnswerverifiedShow Answer

Which of the following statements about life insurance settlement options is true?

Correct AnswerverifiedC

What major feature distinguishes a participating policy from a nonparticipating policy?

Correct AnswerverifiedShow Answer

Which of the following would be a valid reason for an insurer to contest a policy after the contestable period has ended?

Correct AnswerverifiedShow Answer

Which of the following is a common dividend option found in a participating life insurance policy?

Correct AnswerverifiedC

Disadvantages of life insurance settlement options include which of the following? I.Higher yields can often be obtained elsewhere. II.Life income options have limited usefulness at younger ages.

Correct AnswerverifiedC

Correct AnswerverifiedShow Answer

A life insurance policyholder may no longer need life insurance. Such a policyholder may sell the policy to a third party for more than its cash value. The purchaser becomes the new beneficiary and is responsible for subsequent premium payments. Such a financial transaction is called a(n)

Correct AnswerverifiedShow Answer

Reasons for NOT purchasing an accidental death benefit rider include which of the following? I.Most people die as a result of a disease rather than from an accident. II.The economic value of a human life is not increased if death occurs because of an accident.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Life insurance policy proceeds can be paid to a trustee upon the death of the insured. All of the following statements concerning payment of proceeds to a trustee are true EXCEPT

Correct AnswerverifiedShow Answer

Which of the following statements about the assignment of a life insurance policy is (are) true? I.Under a collateral assignment, the policyowner assigns a life insurance policy to secure a loan. II.Under an absolute assignment, only limited ownership rights in a policy are transferred.

Correct AnswerverifiedShow Answer

Which of the following statements about a typical accidental death benefit rider is (are) true? I.Accidental injury must be the cause of death for the increased benefit to be paid. II.The accidental death must occur prior to some specified age for the increased benefit to be paid.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements about nonforfeiture options found in life insurance policies is true?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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C

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C

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C

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