Question 1

Which of the following statements regarding the accidental death benefit rider (also known as double indemnity)is true?

Accepted Answer

A) Adding the accidental death benefit rider doubles the premium for the policy. 
B) Financial planners agree that adding the accidental death benefit rider is a wise purchase. 
C) The economic value of a human life is doubled or tripled if death is caused by an accident,justifying the purchase of the rider. 
D) The death benefit is doubled only if an accidental injury is the direct cause of death and death occurs prior to a specified age. 
A) Adding the accidental death benefit rider doubles the premium for the policy. 
B) Financial planners agree that adding the accidental death benefit rider is a wise purchase. 
C) The economic value of a human life is doubled or tripled if death is caused by an accident,justifying the purchase of the rider. 
D) The death benefit is doubled only if an accidental injury is the direct cause of death and death occurs prior to a specified age. D

Question 2

Malcolm would like to purchase life insurance.He is concerned that he might need additional life insurance in the future and that he might be uninsurable at that time.What provision can Malcolm add to his life insurance policy that will permit him to purchase additional life insurance at specified times in the future without providing evidence of insurability?

Accepted Answer

A) double indemnity rider 
B) guaranteed purchase option 
C) waiver-of-premium provision 
D) accelerated death benefits rider 
A) double indemnity rider 
B) guaranteed purchase option 
C) waiver-of-premium provision 
D) accelerated death benefits rider B

Question 3

All of the following are nonforfeiture options found in cash value life insurance policies EXCEPT

Accepted Answer

A) cash value. 
B) reduction of premiums. 
C) reduced paid-up insurance. 
D) extended term insurance. 
A) cash value. 
B) reduction of premiums. 
C) reduced paid-up insurance. 
D) extended term insurance. B

Question 4

Bruce lied about his health history when he purchased a life insurance policy.He died 3 years after the policy was issued.Which life insurance policy provision will require the life insurer to pay the beneficiary even though Bruce lied on the application?

Accepted Answer

A) incontestable clause 
B) entire contract clause 
C) ownership clause 
D) change-of-plan provision 
A) incontestable clause 
B) entire contract clause 
C) ownership clause 
D) change-of-plan provision

Question 5

A contingent beneficiary in a life insurance policy has the right to

Accepted Answer

A) receive the policy proceeds if the primary beneficiary dies before the insured. 
B) share the policy proceeds with the primary beneficiary. 
C) change the beneficiary designation under specified circumstances. 
D) exercise policy rights if the insured is incapacitated. 
A) receive the policy proceeds if the primary beneficiary dies before the insured. 
B) share the policy proceeds with the primary beneficiary. 
C) change the beneficiary designation under specified circumstances. 
D) exercise policy rights if the insured is incapacitated.

Question 6

Which of the following statements is true regarding an automatic premium loan provision?

Accepted Answer

A) Its purpose is to prevent a policy from lapsing because of nonpayment of premium. 
B) Interest does not have to be paid on an automatic premium loan. 
C) If the provision is used,the insured must show evidence of insurability to resume regular premium payments. 
D) An automatic premium loan,unlike a regular policy loan,is forgiven if the insured dies before the loan is repaid. 
A) Its purpose is to prevent a policy from lapsing because of nonpayment of premium. 
B) Interest does not have to be paid on an automatic premium loan. 
C) If the provision is used,the insured must show evidence of insurability to resume regular premium payments. 
D) An automatic premium loan,unlike a regular policy loan,is forgiven if the insured dies before the loan is repaid.

Question 7

Becky is considering the purchase of a whole life policy on her own life.She is concerned that if she becomes disabled,paying premiums will become a burden.Which provision can Becky attach to her life insurance policy to address this concern?

Accepted Answer

A) guaranteed purchase option 
B) waiver-of-premium provision 
C) accidental death benefit rider 
D) accelerated death benefits rider 
A) guaranteed purchase option 
B) waiver-of-premium provision 
C) accidental death benefit rider 
D) accelerated death benefits rider

Question 8

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

Question 9

Which life insurance policy provision specifies that it is the policyholder,and not the insured or beneficiary,who possesses all contractual rights while the policy is in force?

Accepted Answer

A) nonforfeiture options 
B) entire contract clause 
C) incontestable clause 
D) ownership clause 
A) nonforfeiture options 
B) entire contract clause 
C) incontestable clause 
D) ownership clause

Question 10

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. 
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.

Question 11

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. 
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.

Question 12

All of the following statements about the requirements to reinstate a lapsed life insurance policy are true EXCEPT

Accepted Answer

A) Evidence of insurability is required. 
B) The lapse must have resulted from other than the surrender of the policy for its cash value. 
C) All overdue premiums must be paid along with interest from the premium due dates. 
D) There is no time limit on when the policy may be reinstated. 
A) Evidence of insurability is required. 
B) The lapse must have resulted from other than the surrender of the policy for its cash value. 
C) All overdue premiums must be paid along with interest from the premium due dates. 
D) There is no time limit on when the policy may be reinstated.

Question 13

Life insurance policy proceeds can be paid to a trustee upon the death of the insured.All of the following statements about having the proceeds paid 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. 
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.

Question 14

Advantages of selecting the paid-up additions dividend option in a life insurance policy include which of the following?
I.Evidence of insurability is not required to purchase additional insurance.
II.The additions are purchased at net rates without a loading for expenses.

Accepted Answer

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

Question 15

Which of the following statements about beneficiary designations is (are)true?
I.The primary beneficiary is entitled to the death proceeds of a life insurance policy only if the contingent beneficiary dies before the insured.
II.If a revocable beneficiary designation is used,the insured must obtain the beneficiary's permission of exercise most policy rights.

Accepted Answer

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

Question 16

Which of the following statements about the assignment of a life insurance policy is true?

Accepted Answer

A) The insurer must be notified of any assignment or the death proceeds will be paid to the named beneficiary. 
B) Under an absolute assignment,the only right transferred to a new owner is the right to change the beneficiary designation. 
C) As long as a collateral assignment exists,a creditor will receive the entire death benefit even if the loan has been repaid. 
D) Assignment may be made only with the permission of the insurer and the beneficiary. 
A) The insurer must be notified of any assignment or the death proceeds will be paid to the named beneficiary. 
B) Under an absolute assignment,the only right transferred to a new owner is the right to change the beneficiary designation. 
C) As long as a collateral assignment exists,a creditor will receive the entire death benefit even if the loan has been repaid. 
D) Assignment may be made only with the permission of the insurer and the beneficiary.

Question 17

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 named 
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 named

Question 18

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

Question 19

All of the following statements about the interest settlement option are true EXCEPT

Accepted Answer

A) The minimum guaranteed interest rate is usually equal to the prime rate. 
B) The interest can be paid monthly,quarterly,semiannually,or annually. 
C) The beneficiary may be allowed to withdraw part or all of the proceeds. 
D) The beneficiary may be allowed to change to another settlement option. 
A) The minimum guaranteed interest rate is usually equal to the prime rate. 
B) The interest can be paid monthly,quarterly,semiannually,or annually. 
C) The beneficiary may be allowed to withdraw part or all of the proceeds. 
D) The beneficiary may be allowed to change to another settlement option.

Question 20

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

Exam 12: Life Insurance Contractual Provisions

Which of the following statements regarding the accidental death benefit rider (also known as double indemnity)is true?

All of the following are nonforfeiture options found in cash value life insurance policies EXCEPT

Bruce lied about his health history when he purchased a life insurance policy.He died 3 years after the policy was issued.Which life insurance policy provision will require the life insurer to pay the beneficiary even though Bruce lied on the application?

A contingent beneficiary in a life insurance policy has the right to

Which of the following statements is true regarding an automatic premium loan provision?

Becky is considering the purchase of a whole life policy on her own life.She is concerned that if she becomes disabled,paying premiums will become a burden.Which provision can Becky attach to her life insurance policy to address this concern?

Which life insurance policy provision specifies that it is the policyholder,and not the insured or beneficiary,who possesses all contractual rights while the policy is in force?

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

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

All of the following statements about the requirements to reinstate a lapsed life insurance policy are true EXCEPT

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

Advantages of selecting the paid-up additions dividend option in a life insurance policy include which of the following? I.Evidence of insurability is not required to purchase additional insurance. II.The additions are purchased at net rates without a loading for expenses.

Which of the following statements about the assignment of a life insurance policy is true?

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

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.

All of the following statements about the interest settlement option are true EXCEPT

Risk and Its Treatment

Insurance and Risk

Introduction to Risk Management

Advanced Topics in Risk Management

Types of Insurers and Marketing Systems

Insurance Company Operations

Financial Operations of Insurers

Government Regulation of Insurance

Fundamental Legal Principles

Analysis of Insurance Contracts

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Buying Life Insurance

Annuities and Individual Retirement Accounts

Health-Care Reform; Individual Health Insurance Coverages

Employee Benefits: Group Life and Health Insurance

Employee Benefits: Retirement Plans

Social Insurance

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