Question 1

An insured must pay the specified interest rate to borrow his own "savings" when a loan is made on a whole life policy.

Accepted Answer

A) True 
 B)False  True

Question 2

One life insurance dividend option is to allow dividends to accumulate with compound interest with the insurance company.

Accepted Answer

A) True 
 B)False  True

Question 3

Which of the following is not a standard settlement option?

Accepted Answer

A) interest-only payment amounts 
B) fixed payment amounts 
C) fixed period amounts 
D) fixed payments that in sum will equal the policy's initial face value 
A) interest-only payment amounts 
B) fixed payment amounts 
C) fixed period amounts 
D) fixed payments that in sum will equal the policy's initial face value D

Question 4

Kayla buys a whole life policy when she is 40,and pays premiums on until she is 60. She decides to retire at 60,and has no dependents,no debts,and realizes she really doesn't need the death protection any longer. She is now concerned about generating a lifetime income during her retirement. What option does a whole life policy typically offer that could best help her with this financial need?

Accepted Answer

A) forfeiture of coverage provision (she can surrender the policy and take the cash) 
B) paid up whole life option (use the cash value to buy a paid-up whole life with a lower face value) 
C) annuity conversion option (buy an annuity from the insurer with her cash value) 
D) none of the above 
A) forfeiture of coverage provision (she can surrender the policy and take the cash) 
B) paid up whole life option (use the cash value to buy a paid-up whole life with a lower face value) 
C) annuity conversion option (buy an annuity from the insurer with her cash value) 
D) none of the above

Question 5

The suicide clause states that the life insurer will not have to pay benefits in the event death is caused by suicide after a short (one or two year)waiting period.

Accepted Answer

A) True 
 B)False

Question 6

List and describe briefly the various settlement options under life insurance contracts.

Accepted Answer

The following are standard settlement pr

Question 7

One life insurance nonforfeiture option may result in an insured receiving a new face amount of life insurance.

Accepted Answer

A) True 
 B)False

Question 8

The gender of the person receiving periodic income payments is a factor in the settlement of life insurance proceeds under the:

Accepted Answer

A) fixed period option 
B) interest option 
C) fixed amount option 
D) life income option 
A) fixed period option 
B) interest option 
C) fixed amount option 
D) life income option

Question 9

Mr.Harvey needs life insurance. He is deciding whether to buy a new policy or to reinstate the one that he allowed to lapse last year. He asks you to explain the advantage of reinstatement versus purchasing a new policy,and you tell him:

Accepted Answer

A) settlement options in a new policy may be less favorable than those in the old policy 
B) he will not not have to present evidence of insurability 
C) he will not have to pay premiums that are in arrears 
D) the reinstated policy will not have an incontestability clause 
A) settlement options in a new policy may be less favorable than those in the old policy 
B) he will not not have to present evidence of insurability 
C) he will not have to pay premiums that are in arrears 
D) the reinstated policy will not have an incontestability clause

Question 10

Which of the following is not a life insurance nonforfeiture option?

Accepted Answer

A) cash 
B) reduced face paid up term insurance 
C) extended term insurance 
D) reduced face paid up whole life insurance 
A) cash 
B) reduced face paid up term insurance 
C) extended term insurance 
D) reduced face paid up whole life insurance

Question 11

The waiver of premium option can result in the savings value of a life insurance policy increasing,even if no premiums are currently being paid.

Accepted Answer

A) True 
 B)False

Question 12

Jameson decides to withdraw (not borrow)his life insurance policy's cash value. What happens to the death protection?

Accepted Answer

A) It matures 
B) It ends 
C) It is suspended at the discretion of the insurer 
D) It is paid up 
A) It matures 
B) It ends 
C) It is suspended at the discretion of the insurer 
D) It is paid up

Question 13

The irrevocable beneficiary cannot be changed by the owner.

Accepted Answer

A) True 
 B)False

Question 14

McCartney lied on his life insurance application. He said he was 40,but he was really 60. McCartney dies during the seventh year his policy is in force. When the insurance company finds out about the misstatement of age,what will it do?

Accepted Answer

A) Deny the claim, based on fraud 
B) Pay the face value of McCartney's policy to his beneficiary 
C) Pay some fraction of the face value of McCartney's policy to his beneficiary 
D) Pay the face value of McCartney's policy to his beneficiary if the beneficiary submits documentation attesting to the fact that he/she knew nothing of the misstatement 
A) Deny the claim, based on fraud 
B) Pay the face value of McCartney's policy to his beneficiary 
C) Pay some fraction of the face value of McCartney's policy to his beneficiary 
D) Pay the face value of McCartney's policy to his beneficiary if the beneficiary submits documentation attesting to the fact that he/she knew nothing of the misstatement

Question 15

In the settlement of policy proceeds under an installment option,each payment includes (where principle equals proceeds at the date of death)

Accepted Answer

A) principle only 
B) interest only 
C) cash value, principle, interest and dividends 
D) principle and interest 
A) principle only 
B) interest only 
C) cash value, principle, interest and dividends 
D) principle and interest

Question 16

Kelly owns a life insurance policy. On January 1 she pays her annual premium of $20,000 to the insurer. On April 1,Kelly decides that she doesn't want her life insurance any more. She decides to cancel the policy,get back a pro-rata refund of the unused premium ($15,000),and use the money to pay for liposuction and a tummy tuck. What,if anything,is wrong with this scenario?

Accepted Answer

A) Nothing; Kelly will get back $15,000 and can have her surgery 
B) Kelly has made the faulty assumption that she will receive a pro rata refund; she will instead receive a short rate refund, which will be an amount less than $15,000 
C) Kelly has made the faulty assumption that she will receive any refund; cancellation of a life insurance policy does not result in a refund of premiums paid 
D) Kelly has made the faulty assumption that any surgeon can help her. 
A) Nothing; Kelly will get back $15,000 and can have her surgery 
B) Kelly has made the faulty assumption that she will receive a pro rata refund; she will instead receive a short rate refund, which will be an amount less than $15,000 
C) Kelly has made the faulty assumption that she will receive any refund; cancellation of a life insurance policy does not result in a refund of premiums paid 
D) Kelly has made the faulty assumption that any surgeon can help her.

Question 17

A Tontine is:

Accepted Answer

A) a form of endowment insurance 
B) used frequently to provide retirement income 
C) a life insurance contract paying a death claim on the second person to die 
D) one reason for the divisible surplus provision 
A) a form of endowment insurance 
B) used frequently to provide retirement income 
C) a life insurance contract paying a death claim on the second person to die 
D) one reason for the divisible surplus provision

Question 18

Which of the following is NOT a standard provision found in U.S.life insurance contracts?

Accepted Answer

A) grace period 
B) incontestable clause 
C) provision for misstatement of age 
D) immediate notice of loss provision 
A) grace period 
B) incontestable clause 
C) provision for misstatement of age 
D) immediate notice of loss provision

Question 19

In a life insurance contract,the owner and the beneficiary may be different individuals.

Accepted Answer

A) True 
 B)False

Question 20

The entire-contract clause is one reason the handwritten application for coverage is never attached to the life insurance contract.

Accepted Answer

A) True 
 B)False

Exam 14: Standard Life Insurance Contract Provisions And Options

An insured must pay the specified interest rate to borrow his own "savings" when a loan is made on a whole life policy.

One life insurance dividend option is to allow dividends to accumulate with compound interest with the insurance company.

Which of the following is not a standard settlement option?

The suicide clause states that the life insurer will not have to pay benefits in the event death is caused by suicide after a short (one or two year)waiting period.

List and describe briefly the various settlement options under life insurance contracts.

One life insurance nonforfeiture option may result in an insured receiving a new face amount of life insurance.

The gender of the person receiving periodic income payments is a factor in the settlement of life insurance proceeds under the:

Mr.Harvey needs life insurance. He is deciding whether to buy a new policy or to reinstate the one that he allowed to lapse last year. He asks you to explain the advantage of reinstatement versus purchasing a new policy,and you tell him:

Which of the following is not a life insurance nonforfeiture option?

The waiver of premium option can result in the savings value of a life insurance policy increasing,even if no premiums are currently being paid.

Jameson decides to withdraw (not borrow)his life insurance policy's cash value. What happens to the death protection?

The irrevocable beneficiary cannot be changed by the owner.

McCartney lied on his life insurance application. He said he was 40,but he was really 60. McCartney dies during the seventh year his policy is in force. When the insurance company finds out about the misstatement of age,what will it do?

In the settlement of policy proceeds under an installment option,each payment includes (where principle equals proceeds at the date of death)

A Tontine is:

Which of the following is NOT a standard provision found in U.S.life insurance contracts?

In a life insurance contract,the owner and the beneficiary may be different individuals.

The entire-contract clause is one reason the handwritten application for coverage is never attached to the life insurance contract.

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