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- 1. Multiple Choice
The interest earned on policy dividends is
Tax deductible.
40% taxable, similar to a capital gain.
Taxable.
Nontaxable.
- 2. Multiple Choice
An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement?
$0
$100,000
$200,000
$100,000 plus the total of paid premiums
- 3. Multiple Choice
Children's riders attached to whole life policies are usually issued as what type of insurance?
Adjustable life
Whole life
Term
Variable life
- 4. Multiple Choice
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the
Payor rider.
Other-insured rider.
Change of insured rider.
Juvenile rider.
- 5. Multiple Choice
An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy?
Dividend Options
Guaranteed renewable option
Nonforfeiture options
Guaranteed insurability option
- 6. Multiple Choice
What is the advantage of reinstating a policy instead of applying for a new one?
The face amount can be increased.
The cash values have gained interest while the policy was lapsed.
The original age is used for premium determination
Proof of insurability is not required.
- 7. Multiple Choice
A life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the
Misstatement of age clause.
Incontestability clause.
Reinstatement clause.
Legal action.
- 8. Multiple Choice
When a death claim is submitted, the insurer discovered that the insured understated her age on the application for a life policy. What action will the insurer take?
Deny the claim based on material misrepresentation on the application
Pay the face amount of the policy if the death occurred after the incontestable period
Pay a reduced death benefit based on the insured's actual age
Pay the full death benefit and sue the insured's estate for damages.
- 9. Multiple Choice
Which of the following terms refers to the transfer of some or all of the ownership rights of a life insurance policy from one individual to another?
Nonforfeiture
Endorsement
Transfer of value
Assignment
- 10. Multiple Choice
Which of the following is TRUE about the free-look period in a life insurance policy?
It starts when the application is signed.
It applies only to term life insurance policies.
It can be waived by an insurer.
It starts when the policy is delivered.
- 11. Multiple Choice
A spouse receives $5,000 a month until the principal and interest on her husband's life insurance policy have been paid out. Which settlement option did this beneficiary choose?
Life income
Fixed amount
Cash payment
Fixed period
- 12. Multiple Choice
Which of the following features allows an insurance policy to remain in force for a specific number of days beyond the premium due date?
Reinstatement provision
Nonforfeiture option
Grace period provision
Consideration clause
- 13. Multiple Choice
The insured usually pays $1,200 annually for her life insurance premium. This year, she has accumulated $175 in dividends, and applied that to her next premium, reducing it to $1,025. What dividend option has the insured chosen?
Cash option
Reduced paid-up
Reduction of premium
Accumulation at interest
- 14. Multiple Choice
All of the following are nonforfeiture options in life insurance policies EXCEPT
Automatic premium loans.
Cash surrender value.
Extended term.
Reduced paid-up insurance.
- 15. Multiple Choice
Which of the following is NOT a standard exclusion in life insurance policies?
Aviation
Military service
Hazardous occupation
Disability
- 16. Multiple Choice
Under what circumstances will the contingent beneficiary receive the death benefit?
If designated by the primary beneficiary
If contingent beneficiary is the insured's estate
If the primary beneficiary dies before the insured
If designated by the insured
- 17. Multiple Choice
If a life insurance policy has an irrevocable beneficiary designation,
The beneficiary can never be changed.
The beneficiary can only be changed with written permission of the beneficiary.
The beneficiary cannot be changed for at least 2 years.
The owner can always change the beneficiary at will.
- 18. Multiple Choice
The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called
Accelerated benefit.
Nonforfeiture.
Waiver of premium.
Guaranteed insurability.
- 19. Multiple Choice
All of the following are TRUE regarding the guaranteed insurability rider EXCEPT
It allows the insured to purchase additional coverage without proof of insurability.
It is available automatically, for no extra premium.
The insured may purchase additional coverage at the attained age.
It usually expires at the insured's age 40.
- 20. Multiple Choice
All of the following riders affect the Death Benefit EXCEPT
Accidental death
Reduced Paid-up
Guaranteed insurability
Return of premium
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