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my policy/provisions
life insurance policies and provisions
| Question | Answer |
|---|---|
| There are several types of whole life policies. Which of the following type of whole life policy offers flexible premium payments tied to interest rate fluctuations: | current assumption whole life |
| Continuous premium, limited premium and single premium are types of whole life policies. What is indicative of a continuous premium method | it has the lowest annual premium |
| Samantha wants to purchase life ins, but her funds are limited at this time. Her agent has recommended a whole life policy that starts out with a premium that is lower than usual. The prem increases every year for a specified # of years. This is called a | graded premium life policy |
| t or f In the beginning a greater amount of the premium is applied to the death benefit - less to the cash is a characteristic of a graded premium life policy | true |
| __________ is a life insurance policy that offers the same guarantees as traditional whole life insurance with a lower initial premium that remains level for the first five years of the policy | modified life |
| Charles and Rick have started up an electronics business. Their business is young and their cash flow is tight. What is the primary advantage of them purchasing a modified premium whole life policy | They are able to purchase a larger policy than traditional whole life |
| t or f A universal life plan differs from a whole life plan in the following way: A whole life plan displays a detailed list of all mortality, expense and interest payments in the premium calculation | false |
| The cash value in a whole life policy is held in the insurance company's | in the company's general account |
| An agent wants to qualify to sell variable life plans. He must | Secure a license from FINRA as well as the state |
| Matthew has recently purchased a variable life insurance policy. In reading his prospectus, he sees that the various accounts are the same managers as some of the mutual funds he owns. Matthew should understand which of the following | The insurance company maintains separate accounts for each investment and they are not co-mingled with other assets |
| Whole life and unvrsl life differ EXCEPT: -Univ life is lapse proof -Both whole life & univ life have specfd death benefit -Both whole life & univ life may build cash value -Both whole life & univ life are priced based on age | universal is lapse proof |
| A variable life plan must be a type of universal life because | The accumulation accounts must be separated from general company assets |
| is it true concerning Interest Sensitive Whole Life (ISWL: The policyholder will always know the amount of cash value available | false |
| is it true concerning Interest Sensitive Whole Life (ISWL): The death benefit is guaranteed as long as premiums are paid Policy loans are available The cash account accumulates tax free inside the policy | yes, true |
| characteristics of an industrial policy | Industrial policies are usually less flexible and have higher premiums than ordinary policies. |
| Timothy has a plan that provides coverage for life, but the premiums are not due beyond age 65. It has guaranteed premium, accumulates cash value and the coverage will never decrease. Timothy has purchased | limited pay life plan |
| T or F Arnold has purchased an Adjustable Life plan. His agent has told him that he may pay varying premiums each year, Pay a minimum amount as long as he funds the mortality cost and Pay a higher premium if he wants to build cash faster | true |
| Term life insurance policies are used to provide temporary insurance protection - usually for a specific amount of time. If an insured provides evidence of insurability at the end of a term and qualifies for reduced premiums rates, the insured has a | reentry term policy |
| characteristics of term life insurance | It is pure death protection It is generally not renewable after age 65 or 70 It becomes more expensive over time |
| Angelina purchased a policy with a face value of $100,000. She died 10 years later and the policy paid a death benefit of $50,000. Why | her policy was a decreasing term |
| can the face value be changed in a joint life policy | no |
| can employees deduct premium payments from a group life insurance policy | no |
| t or f Credit life insurance can be written on both a group and an individual basis,insurance premiums are often financed in conjunction with the item purchased, The policy does not have a conversion option | true |
| Randall's brother purchased a 20-year family maintenance policy when he was 30 years old. He died at age 40. How many years will benefits be paid to his beneficiaries? | 20 years |
| If Rich purchases a 10-year plan and dies after 5 years, how would a family maintenance plan compare to a family income plan | The family maintenance plan will pay 10 years and the income plan will pay 5 years |
| Valerie is looking at types of insurance to enhance her retirement. Which of the following should she NOT consider in planning her retirement? Term Endowment Whole life Limited pay life | term |
| A _____________ life insurance policy is issued in a small amount and has frequent premium payments | industrial life |
| The cash values of a whole life policy are affected by the interest rates. What determines these interest rates? | a formula set by the insurer |
| A policy that is paid up early and endows at the age of 100 is called which of the following | 20 pay life |
| Which of the following is a type of permanent plan that has a "corridor"? Variable life Universal life option 1 Term life Whole life | universal life option 1 |
| what is a corridor | an additional amount of pure life insurance in the form of decreasing term, which is used to increase the policy's death benefit so the policy does not exceed a certain maximum ratio of cash value to death benefit set by the IRS |
| Mr. Watson wants to purchase a policy that will provide the greatest amount of death protection and some cash accumulation at the best value for his periodic premium dollar. What should he choose | straight whole life |
| A family maintenance policy uses a _________ rider, rather than a ____________ rider, which is used in a family income policy. | Level term/Decreasing term |
| When constructing an adjustable life policy, which of the following is used as the base policy? Whole life Variable life Increasing term Decreasing term | whole life |
| true or false The 30 year limited pay life policy takes 30 years to pay, and it endows at 100. | true |
| What type of policy does Shelly have if the cash value in Shelly's policy increased to a point where the corridor was applied? | universal life option 1 |
| what policy is sold in proportioned units to cover an insured, as well as the insured's spouse and children? | family plan |
| Which of the following is a business plan where each of the partners agree to buy the interest of a deceased partner | cross purchase plan |
| With a universal life policy, which is NOT a true statement? The death benefit can be modified Cash values can be allotted toward premium payments Premiums can be increased or decreased With changes, a new policy needs to be issued immediately | With changes, a new policy needs to be issued immediately |
| Which of the following is a conversion permitted in an Industrial life insurance policy? Only after purchasing a whole life product To annual renewable term Before age 31 Of two or more policies into a single ordinary policy | Of two or more policies into a single ordinary policy |
| Clark has a universal life policy. What are the reserves usually invested in with this type of policy? | long term securities |
| Harriet owns a 30-Pay Life policy that she purchased at the age of 30. When will the cash value equal the face amount of the policy | when she turns 100 |
| what policy has premiums payable for 60 years, insurance protection for 60 years and endows at age 100? | Straight whole life policy issued at age 40 |
| variable life insurance policy has a guaranteed minimum death benefit true or false | true |
| The premiums start low, and increase each year until finally leveling off for the remainder of the contract period are characteristics of a | graded premium whole life |
| Which of the following statements is true about level term? Level term remains at a level face amount The premiums increase at renewal There is no requirement to prove insurability at renewal All of the above | all of the above |
| What type of policy has premiums paid to age 100, and upon age 100 pays the face amount as an endowment | straight whole life |
| What is the main difference between traditional life insurance and variable | cash values |
| Universal life policies are different from other whole life insurance policies because of which of the following: Free look period Premium schedules Beneficiary provision Settlement option | premium schedules |
| starts with a lower premium that increases over the life of policy is a characteristic of a | modified whole life policy |
| which of the following policies would have the higher initial premium? A One Year Renewable and Convertible policy A participating whole life policy A nonparticipating whole life policy A ten-year term policy | participating whole life policy |
| If an insured becomes permanently and totally disabled, a waiver of premium rider on his/her life ins contract would allow coverage to remain in force, without payment of premiums, during the period of the disability. What is the maximum age of the rider | 75 |
| He has a dsblty income rider on his life policy. With a dsblty income rider - The insurer pays him a specified amount each month to the insured The $ continues for the duration of the dsblty There is a waiting period before bnfts are paid all | all of the above |
| Mrs. Olsen worries that her health may deteriorate in the future. She wants to provide adequate coverage for herself and her family. Which rider should she consider for her life policy? | guaranteed insurability rider |
| The payor rider is sometimes added to a life ins contract on a juvy. The purpose of the rider is to make sure that the cvrg on the juvy does not lapse if the adult becomes disabled or dies. What are the characteristics of this rider | The premiums can be waived until the juvenile reaches a specified age The premiums can be waived until maturity date of the contract The insurance remains in force even if the premiums are not paid. |
| Term riders are available to help the insured to customize their life ins contract to fit their individual needs. All of the following are common term riders EXCEPT: Waiver of premium Accelerated death benefit Variable life Return of premium | variable life |
| Which of the following is a type of additional insured rider? Family term rider Payor rider Substitute insured rider Disability rider | family term rider |
| If the insured becomes confined to a nursing home, longterm care rider would reimburse health care expenses. Certain optional benefits may also be provided such as - Hospice care Adult day care Cost of living expenses All of the above | all of the above |
| The provision in a life ins cntrct which states the entire agrmnt btwn the insurer and the insured is contained in the contract, including the applicatn if attached, insuring agreements, exclusions, conditions, declarations and endorsements is called the | entire contract clause |
| cmpltd her ins app on the 9Feb. She paid her initial prem on the 10Feb. issued on the 16Feb. delivered on the 17Feb. 15-day free look. When does she need to return the policy if she decides she does not want to purchase it, and wants her prem refunded | march 3rd |
| key employee ins. John is the insured, but the company is the owner of the policy. What rights does John have as the insured? Choice of premium mode Beneficiary designation Take out a policy loan None of the above | none of the above |
| Howard decided to name his wife Helena as the primary beneficiary, and his son Collin as the contingent beneficiary. What is the most likely circumstance for Collin to receive the benefits of Howard's policy | when howard dies, Helena has already passed away |
| All statements are true about irrevocable beneficiaries EXCEPT: The beneficiary cannot be changed without written consent The policyowner makes premium payments. The policyowner retains the right to borrow against the policy All of the above | The policyowner retains the right to borrow against the policy |
| common life ins provision is the _____. If there is insufficient proof to show order of death when the insured and benfcry die in the same accident, it's presumed that the insured died last, and the proceeds are payable to the named contingent beneficiary | Uniform simultaneous death act |
| Premium payments for life insurance are made in advance. Typically they are paid to the insurer's home office or to the agent. The premium payment mode defines the timing of the payments. Usually the payment mode with the best economy is | annually |
| If the insured dies during the grace period, how will it affect the proceeds of the policy? | The benefits are paid to the beneficiary minus the outstanding premium |
| To protect a policyholder from an inadvertent lapsing of a contract, the automatic premium loan (APL) provision may be added to a cash value life policy. T or F It can be applied for at any time | False |
| 3 characteristics of the Automatic premium loan provision | The policy will lapse if there is not enough cash value to cover the premium payment Reinstatement is not available if the policy lapses for lack of payment Outstanding loan amounts are deducted from the death benefit |
| Tom is an accountant and as such, likes to plan his income and expenses on a relatively finite basis. What is his best option for life insurance premiums? Flexible premium Variable premium Level premium Automatic premium loan | level premium |
| policy was not surrendered for its cash value. Under what conditions can the policy be reinstated? Proof of insrbility may be required All back premiums need to be paid It has not been more than three years since the policy lapsed All of the above | all of the above |
| Matt is a little short on cash and wants to access some of the cash in his life policy. A partial cash value distribution can be made. If he has the intention to repay the cash he takes out from his policy - it is considered a | policy loan |
| Which of the following is not a nonforfeiture option? Non-participating Cash surrender value Reduced paid up ins Extended term ins | non participating |
| Dividends are determined by the difference between the gross premiums paid, and the loss experience of the insurer. It is the ____________________ that allows the policyholder to leave the dividends with the insurer to accumulate interest. | accumulation at interest option |
| When the policyholder sells, gives or pledges a policy as collateral, it is called - Incontestability Consideration Settlement Assignment | assignment |
| Which of the following is not a settlement option available to most life insurance policyholders? Fixed amount option Fixed period option Accelerated endowment option Life income option | Accelerated endowment option |
| Karl's grandmother has been diagnosed as being in end-stage renal failure. The ______________ provision of her life policy will giver her access to funds for rent, food and necessary medical services | accelerated benefits |
| If you decide to use the acclrtd benefit of a life policy, whats responsibility of the insurer? Provide an illstrtn showing effect on the death benefit Notify that their eligibility for Medicaid could be affected. Both or neigher of the above | both |
| Most life insurance policies have common exclusions. Which of the following is not such an exclusion? Suicide Dangerous activity Aviation Sexual orientation | sexual orientation |
| Naomi is the tertiary beneficiary on her uncle's life insurance policy. Under what circumstances would she collect the benefits of the plan | when both primary and secondary pre-decease the tertiary beneficiary |
| Ron and Jack are partners. The business assignment of their life insurance policies was made to protect | The financial interest that the lender has in the insured |
| Claire has a policy with a payor provision and a 9 year old child. What happens if the child becomes disabled | Nothing happens. The payor provision is for the adult that is paying the premium for the policy |
| Ms. Swanson has a $75,000 mortgage and assigns a $150,000 policy. The assignee and the mortgagee received a check payable to them jointly. What is this agreement called? | collateral assignment The collateral assignment is used when a check is to be paid jointly to both parties |
| When a minor child is the insured, which is true about the payor rider? If the premium payor dies, prmms are waived until the insured child is 25. Premiums are waived if the minor child dies Premiums are doubled if the minor child becomes disabled | If the premium payor dies, premiums are waived until the insured child is 25. |
| can a waiver of premium rider can be added to a term policy | yes |
| Carly's grandfather wants to stop paying premiums on his life policy. If he wants coverage for the remainder of his life, which of the following policies would provide this coverage? Term Extended Term Reduced Paid-up Endowment | reduced paid up |
| The front page of all insurance policies must contain which of the following? A list of riders Insuring Clause Incontestable clause Consideration clause | insuring clause |
| The 10-day free look period gives the insured the opportunity to look over a policy to decide if he/she is satisfied that it meets their requirements. When does the free look period begin? | when the policy is delivered |
| Sometimes an insurer will cancel a life policy. What happens to all unearned premiums | they will be returned |
| Dominic has decided to cash in his life policy. How soon must the cash surrender values become available to him | 6 months |
| A clause that protects a beneficiary from creditor's coming after the proceeds of a policy is called | spendthrift clause |
| If Louise wants to provide her beneficiary with equal payments for a specific time using the proceeds of her life insurance, she would select | a fixed period |
| Maggie's life policy has lapsed. There are several ways she can recover some of the value of her policy. Which of the following is NOT a non-forfeiture option? One-year term Reduced paid-up Extended term Cash Surrender | one year term |
| Most life policies have exclusions. The most common exclusion in a life policy is __________. | suicide |
| How long can an insurance company delay payment of a cash surrender | 6 months |
| A war clause exclusion can be enforced at | times of war or during wartime |
| Which of the following is an exclusion that would be found in a life policy? Hazardous occupation War Suicide All of the Above | all of the above |
| If an insured commits suicide __________, the insurer will return the premiums to the beneficiary | within 2 years |
| Clarice is the owner of the life insurance policy on her husband Herb. What can she NOT do without Herb's consent? | increase the amount of the insurance |
| Which statements about the apl provision of a whole life policy is NOT true? Its use causes dividends to be withheld If premiums are missed, the automatic premium loan provision uses cash values Using the provision preserves insurability | Its use causes dividends to be withheld |
| What happens if an estate is named as a beneficiary on a life policy? Proceeds are included in the gross estate Proceeds are divided equally to relatives Proceeds are tax-free All of the above | Proceeds are included in the gross estate |
| Jennifer has a $200,000 life policy. Her husband is a 50% beneficiary. Her son and daughter are beneficiaries with 25% each. Before she dies, she takes out a $100,000 loan. What does her daughter get upon her death? $125,000 $50,000 $25,000 $10,000 | 25,000 |
| what is the rejected business rule | It is a circumstance where the agent's company refuses to write the policy. agent can shop for client and still receive a commission |
| If an insured misstates his or her age at the time of policy issue, what action will the insurer take in response to such a misstatement when a claim is filed?. | The amount payable to beneficiaries is equal to the amount that the premium would have purchased if her correct age had been known |
| in regards to settlement options is it true If the owner did not specify a settlement option, the beneficiary may select any option | true |
| in what situation does the policy owner not have complete control of the policy? | If an irrevocable beneficiary has been named on the policy |
| 36 months after a policy was issued, the policy insured committed suicide. What is the insurance company's liability in this situation | the face amount |
| Besides a limited period of time after the discontinuance of premium payments, what else may be required in order to reinstate a lapsed policy | Payment of any outstanding loans, as well as payment of any back premiums Proof that he/she is still insurable |
| Julie's father had an accidental death and double indemnity provision in his life policy. Under what circumstances will his policy pay an amount greater than the face value of the policy? | an accident |
| Which statement is true about the Waiver of Premium? option that may be rated or denied It covers accidental disability beginning the first day It has a waiting period of 31 days It is not effective if Workers Compensation covers the disability | It is an option that may be rated or denied |
| Which of the following is not included in the insuring clause? The face amount of the policy The contingent beneficiary The name of the insurer The name of the insured | the contingent beneficiary |
| A Nonforfeiture Option that provides continuing cash value buildup is called | reduced paid up option |
| The ___________ is intended to protect the policyholder against unintentional lapses in coverage | grace period |
| What happens if there is an outstanding policy loan upon the insured's death? | The loan, plus any interest due, is deducted from the death benefit |
| The reinstatement provision in a life policy _____________. | Required the policyowner to pay, with interest, all premiums that are in arrears in order for the policy to be reinstated. |
| what provision describes that the contract cannot be changed after it has been issued | entire contract |
| provision prohibits the insurance agent from altering any of the terms or conditions of the contract | entire contract |
| this provision protects the insured from any attempts by the insurer to alter the agreement by referencing other documents | entire contract |
| true or false the entire contract provision makes it clear that the contract is a three party agreement among the insured, the insurance company and the agent | false |
| When Joshua took out a life policy, he overstated his age. What will the insurer's course of action be if it discovers the misstatement after the insured dies? | Pay an amount equivalent to that which the premium would have purchased at the correct age |
| A husband wants to name his wife as a beneficiary of his life policy, but wants to retain all of the rights of ownership. Which of the following beneficiary designation would be most appropriate | revocable beneficiary |
| Margaret may be late paying the premium on her life policy. What is the typical grace period on a life policy? | 30-31 days |
| All of the following are ways in which dividends may be used by the policyowner EXCEPT: As stock in the company Left to accumulate with interest Used to buy additional paid-up insurance Applied to reduce the premium | as stock in company |
| All life insurance policies have which of the following standard provisions? Waiver of premium Legal action Grace period Guaranteed renewability | grace period |
| If a policy has been ___________, it will not be reinstated | surrendered for its cash value |
| t or f example insuring clause? "Subject to the provisions of this contract, the ins comp will pay the death bnft to the named bnfcry. The death bnft will be paid on receipt of due proof of death of the insured and surrender of this policy." | true |
| At what point does an insurance policy become incontestable, even if fraud is evident | 2 years |
| Under what circumstances would a new policy be considered a replacement? When existing life ins is reduced in face amount When existing life insurance is surrendered When existing life insurance is continued as an extended term All of the above | all of the above |
| Gary became disabled 10 months before he turned 65. His disability lasted 36 months. How long will the company waive his premiums under the waiver of premium clause? | 30 months With a 6-month waiting period, that leaves 30 months remaining for his premiums to be waived under the waiver of premium clause |
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