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Life Insurance
Questions A
| Question | Answer |
|---|---|
| Insurers often set children's term rider limits on the basis of which of the following? | issuing the rider for a specified amount or for a specified percentage of the base policy A common approach to setting children's term rider limits is to issue the rider for a specified amount (such as $5,000 or $10,000). |
| Which statement about the interest-only life settlement option is NOT correct? | Though policy guarantees minimum interest rate,if interest earned is more than guaranteed minimum,company pays lower amount. policyowner selects interest only option, insurer holds the policy proceeds until future date & pays interest that those proce |
| Replacement is considered to have occurred if a life insurance policy is purchased and, in conjunction with that purchase, any of the following occur with an existing policy EXCEPT | The existing policy's beneficiary designation is changed. Replacement occurs when an applicant is about to buy a new life insurance policy or annuity and, as a result of the purchase, an existing life insurance policy or annuity will be surrendered. |
| Jones commits suicide 18 months after buying a life insurance policy that contains a standard suicide provision. Jones's beneficiary will get which of the following from the insurer? | a return of premiums paid, plus interest Because the suicide occurred within the suicide exclusion period, the insurer will not pay the death benefit but will instead return the premiums paid, plus interest. |
| Phil has selected the paid-up insurance dividend option with his participating whole life insurance policy. Which of the following best describes the purpose for this type of dividend option? | Pay-up the whole life insurance policy early. It is the paid-up additions option, not the paid-up insurance option, that uses the dividend to buy additional paid-up insurance of the same type as the base policy. |
| How does a family income policy differ from a family maintenance policy? | A family income policy combines whole life insurance with decreasing term, while a family maintenance policy combines whole life and level term insurance. A family income policy does not combine whole life insurance with increasing term life insurance. |
| If Lynn accidentally misstated her age on her life insurance application, what will the insurer do if this is discovered after the end of the contestability period? | The insurer will re-calculate the death benefit. If the insurer finds that Lynn misstated her age or sex, the insurer re-calculates the amount of the death benefit. The insurer does this even if the misstatement occurred after the end of the contestabl |
| Which statement regarding the extended term nonforfeiture option is NOT correct? | The extended term option is available where the original policy was issued on a substandard (rated) basis. If the original policy was issued on a substandard (rated) basis, then the extended term nonforfeiture option is normally not available. |
| Ralph,Jerry/Paula are primary & equal beneficiaries of the $600,000 insur policy on the life of their mother,Judy.Ralph dies before his mother.He leaves 2 children,Tim & Hal.Judy's life insur policy designates the death benefit per capita.How will the ins | Jerry and Paula will each receive $300,000 If the death benefit was designated per capita, Ralph's share of his mother's per capita beneficiary designation does not go to his children but will be divided among his surviving siblings, Jerry and Paula. |
| The charge-free withdrawals provision of a deferred annuity contract does which of the following? | It permits annuity contract owners to withdraw a specified percentage of the accumulated value annually without imposing a surrender charge. The charge-free withdrawals provision permits annuity contract owners to withdraw a specified percentage (e.g., |
| If a variable universal life policyowner chooses death benefit option 3, what will the benefit equal? | the policy's specified amount plus the total premiums paid Death benefit option 2 under a variable universal life insurance policy pays a death benefit equal to the policy's specified amount plus the cash value. |
| In general, life insurance death benefits paid to a beneficiary in a lump sum are not taxed. Which statement is correct if the payout option is other than a lump sum? | Interest earnings are taxable income to the beneficiary. In general, life insurance death benefits paid to a beneficiary in a lump sum are not taxed. If the payout option is other than a lump sum, interest earnings are taxable income to the beneficiary |
| ABC Insurers just received an application from a customer who plans to buy a new policy to replace one issued by Heritage Insurers. Within how many days must ABC Insurers notify Heritage Insurers of the proposed replacement? | three (3) When replacement is involved, the replacing insurer must notify any existing insurers that may be affected by the proposed replacement within three business days of receiving the application. |
| Which one of the following statements about deferred compensation plans is most correct? | They allow executives to delay receiving current compensation until a future time. Life insurance is a popular funding vehicle for non-qualified deferred compensation plans. Amounts deferred are used to pay premiums on cash value life insurance. |
| Which one of the following statements regarding simplified employee pension (SEP) plans is most correct? | A SEP plan is the most common type of qualified plan sponsored by small employers. All contributions made to a SEP on the employees' behalf are immediately and fully vested. |
| Wilson buys life insurance but commits suicide three years later. Wilson's beneficiary will get which of the following from the insurer? | the full death benefit Because Wilson's suicide occurs after the exclusion period, the insurer will pay the full death benefit. If the suicide had occurred during the exclusion period, the insurer would return the premiums paid, plus interest. |
| Why are endowment contracts NOT considered life insurance? | They endow before age 120. Like other types of life insurance, endowment contracts pay a death benefit at the insured's death. |
| Term life insurance is well suited for all the following needs EXCEPT: | a source of emergency cash for any financial need. Because it only offers protection for a limited time, term life is best used for temporary needs that have a defined end-date. |
| Dan surrenders his whole life policy and decides to apply its $20,000 cash value to buy $35,000 of whole life coverage for the remainder of his life. Dan has chosen which of the following? | reduced paid-up option a cash surrender option,policyowner surrenders policy & insurer pays cash value to policyowner in lump sum.policy canceles & insurer's responsibility under the terms of contract ends.policyholder cannot reinstate surrend policy. |
| Anne, a life insurance applicant, wants to change an answer that she gave on the application. She should do which one of the following? | Cross out and initial incorrect entry,& enter correct information next to it. applicant should not erase incorrect entry. |
| Al is a 60-year-old male. His $100,000 fixed annuity can provide $5.50 per $1,000 of accumulated value under a straight life payout option. How much income can Al expect and for how long? | $550 a month for life Fixed annuitized amounts do not change over the term of the annuitization period. Under a straight life payout option, Al's $100,000 annuity fund would generate $550 a month for as long as he lives. |
| While equity-indexed annuities (EIAs) are fairly complex products, the basic concept is simple enough, and is best described as which one of the following? | The percent of change in the selected stock index over contract's term determines percentage interest rate credited to the funds in EIA. An EIA does not use average percentage of change in selected stock index over the past ten years as the basis for d |
| Andrea bought a $300,000 term-to-55 policy. Which of the following statements about the policy is NOT correct? | The policy will pay the entire death benefit only if Andrea reaches age 55. The premium for the coverage stays the same until the policy ends at age 55. |
| Who is the contingent beneficiary, 2nd level, in following beneficiary designation: "Sally Grant,wife of insured,if she survives insured;otherwise in equal shares to surviving children of the insured,if any; otherwise to Frank Grant,brother of insured." | Frank Grant Sally Grant is the primary beneficiary. |
| All of the following statements regarding the accidental death benefit rider to a life insurance policy are correct EXCEPT | There is usually no additional premium required to buy an accidental death benefit rider. These riders may be referred to as "double indemnity" or "triple indemnity" riders. |
| Sue's annual premium is $1,500 and the declared dividend was $200. If Sue chooses the premium reduction dividend option, she will receive a premium notice for which of the following? | $1,300 Under the premium reduction option, the insurance company keeps the dividend and uses it to reduce the next premium due. Sue's next premium notice will be for $1,300. |
| All the following statements regarding the automatic premium loan are correct, EXCEPT: | The insurer deducts the automatic premium loan on the first day of premium payment grace period if the policyowner has not paid by that time. The insurer can set up the policy so that automatic premium loans can pay no more than 12 monthly premiums. |
| Which statement about binding receipts is NOT correct? | binding receipt guarntes covrge from time applicant completes appl.This doesnt hold true if insured later found uninsurable.insurer issues binding receipt if premium paymt is made with application.but,if premium paid when policy delivers,insurer issues re |
| George purchased an annuity in which his wife will receive income for as long as she lives. In this scenario, what is George most correctly called? | the owner The annuitant is the person the owner chooses to receive the periodic annuity payments when the contract annuitizes. The owner is not always the annuitant. |
| Six months ago, Bill cashed in his life insurance policy. He now realizes his mistake and asks to reinstate his coverage at his then-attained age. The insurance company is obligated to do which of the following? | Do nothing as the company has no contractual obligation to the policy owner at this point. If Bill surrendered his policy; repayment of back premiums, plus interest, and proof of insurability will not help. |
| All the following statements regarding the insurer disclosure that must be made with respect to accelerated benefits riders are correct EXCEPT | If a life policy includes an accelerated benefit, most states require that insurers provide a disclosure statement to the applicant at the time the accelerated benefit payout is requested. This is a true statement. |
| An insurance company that is incorporated under the laws of Alabama is considered what type of insurer in Georgia? | foreign An insurer that is incorporated in another state but transacting insurance in Georgia is considered a foreign insurer in Georgia. |
| Under a joint life insurance policy, when does the insurer pay the death benefit? | when the first insured dies Under a joint life insurance policy, the insurer does not pay the death benefit when either insured dies. |
| The typical settlement options involving life contingencies generally include all of the following, EXCEPT | period certain option Life income with guaranteed minimum (refund guarantee or life annuity certain) is a type of life contingency option. |
| When calculating the ongoing income that a surviving family will need after an insured dies, the insured must consider all of the following expenses EXCEPT | funeral expenses After an insured dies, the surviving family will have an ongoing need for funds to pay for transportation expenses. |
| Which statement about life insurance cash value withdrawals is NOT correct? | Universal life insurance policies permit access to cash value through loans and full or partial policy surrenders. A policyowner can withdraw amounts less than the full cash value. |
| What is a typical life insurance policy's grace period? | 31 days Don't confuse with free-look period.The grace period for paying a life insurance premium is generally 31 days. Although the premium is due on its due date, the policyowner has 31 days after this date to pay the premium before the policy lapses. |
| When can Hank add a waiver of premium or a waiver of cost rider to his universal life policy? | when the policy is issued or at a later date Other than the age limitation, both UL riders can be added at policy issue or later. |
| Insurers will decline applicants with very high substandard risk ratings. What percentage of applicants do insurers reject? | about 2 percent It is less than half this amount. |
| An applicant for an insurance policy submits an application without the first premium. Which of the following is correct? | The applicant has invited the insurer to make an offer When an applicant submits an application with the first premium, the applicant has made an offer that the insurer may or may not accept. |
| Which one of the following statements about the tax treatment of viatical settlements is most correct? | The insured pays no federal income tax on the money from a viatical settlement. The insured owes no federal capital gains tax on the money received from a viatical settlement. |
| Which one of the following statements about term life insurance and permanent insurance is most correct? | When issued, the level term policy will be less expensive than the permanent policy of the same face amount. Under the convertibility provision of a term insurance policy, the owner can convert the term coverage for a permanent life insurance policy. |
| To be considered insurable, a risk must meet all the following requirements EXCEPT | The loss must be certain to occur. To be insurable, a loss must be definable, measurable, uncertain, and not catastrophic. |
| Proceeds from a life insurance policy can be paid out in a variety of ways. Which one of the following most correctly describes the two general categories of life insurance settlement options? | those without a life contingency and those with a life contingency The two settlement option categories are not straight life and survivorship. |
| What does the length of an annuity's surrender charge period depend on? | the contract design and the insurer issuing the contract The age of the annuitant is not an issue in determining an annuity's surrender charge period. |
| Which of the following most accurately describes the basic function of a life insurance policy's net single premium? | The net single premium is the sum of the present values of all expected benefits under the policy. net single premium for a traditional life insurance policy is not the cost of benefits provided by the policy, considering only the earned interest. |
Created by:
tonithetiger123