Question 1

All of the following are common dividend options found in participating whole life insurance policies EXCEPT

Accepted Answer

A) reduction of premiums. 
B) dividend accumulations. 
C) purchase of paid-up insurance. 
D) purchase of insurance company stock. 
A) reduction of premiums. 
B) dividend accumulations. 
C) purchase of paid-up insurance. 
D) purchase of insurance company stock. D

Question 2

Which of the following statements about life insurance settlement options is true?

Accepted Answer

A) Under the fixed period option,the beneficiary normally has the right to make partial withdrawals in case of emergency. 
B) Under the fixed period option,any remaining proceeds revert to the insurer if the beneficiary dies before the end of the fixed period. 
C) Under the fixed amount option,the beneficiary can be given the right to increase or decrease the fixed amount. 
D) Under the fixed amount option,any interest credited in excess of the guaranteed rate increases the amount of each periodic payment. 
A) Under the fixed period option,the beneficiary normally has the right to make partial withdrawals in case of emergency. 
B) Under the fixed period option,any remaining proceeds revert to the insurer if the beneficiary dies before the end of the fixed period. 
C) Under the fixed amount option,the beneficiary can be given the right to increase or decrease the fixed amount. 
D) Under the fixed amount option,any interest credited in excess of the guaranteed rate increases the amount of each periodic payment. C

Question 3

Which of the following statements about life income settlement options is (are)true?
I.Under a joint-and-survivor life income option,payments cease at the death of the first annuitant.
II.Under a life income with period certain,a contingent beneficiary is guaranteed a minimum number of payments regardless of when the primary beneficiary dies.

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 D

Question 4

Which of the following statements about beneficiary designations is true?

Accepted Answer

A) A primary beneficiary is entitled to the death proceeds of a life insurance policy only if the contingent beneficiary dies before the insured. 
B) If a revocable beneficiary designation is used,the insured must obtain the beneficiary's permission to exercise most policy rights. 
C) The effect of a class beneficiary is to divide death proceeds equally among the members of a particular group. 
D) Naming the insured's estate as primary beneficiary is the best way to avoid probate expenses,inheritance taxes,and claims of creditors. 
A) A primary beneficiary is entitled to the death proceeds of a life insurance policy only if the contingent beneficiary dies before the insured. 
B) If a revocable beneficiary designation is used,the insured must obtain the beneficiary's permission to exercise most policy rights. 
C) The effect of a class beneficiary is to divide death proceeds equally among the members of a particular group. 
D) Naming the insured's estate as primary beneficiary is the best way to avoid probate expenses,inheritance taxes,and claims of creditors.

Question 5

The cost-of-living rider typically bases increases in the policy face value on changes in the

Accepted Answer

A) gross national product. 
B) interest rate for short-term U.S.government securities. 
C) consumer price index. 
D) national wage level. 
A) gross national product. 
B) interest rate for short-term U.S.government securities. 
C) consumer price index. 
D) national wage level.

Question 6

Disadvantages of life insurance settlement options include which of the following?
I.Higher yields can often be obtained elsewhere.
II.Life income options have limited usefulness at younger ages.

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 7

Which of the following statements about nonforfeiture options found in life insurance policies is true?

Accepted Answer

A) Under the reduced paid-up option,the paid-up policy is term insurance. 
B) Under the extended term option,the amount of term insurance is less than the face value of the surrendered cash value policy. 
C) Under the reduced paid-up option,no additional premiums must be paid. 
D) Unless the policyowner has selected another nonforfeiture option,the cash value option goes into effect automatically. 
A) Under the reduced paid-up option,the paid-up policy is term insurance. 
B) Under the extended term option,the amount of term insurance is less than the face value of the surrendered cash value policy. 
C) Under the reduced paid-up option,no additional premiums must be paid. 
D) Unless the policyowner has selected another nonforfeiture option,the cash value option goes into effect automatically.

Question 8

Which of the following statements about the entire contract clause is true?

Accepted Answer

A) It allows the insurer to change the policy terms without the insured's consent. 
B) It specifies that all statements in the application are considered warranties. 
C) It specifies that the life insurance policy and the attached application constitute the complete agreement between the parties. 
D) It prevents the insurance company from contesting a policy after it has been in force for two years during the lifetime of the insured. 
A) It allows the insurer to change the policy terms without the insured's consent. 
B) It specifies that all statements in the application are considered warranties. 
C) It specifies that the life insurance policy and the attached application constitute the complete agreement between the parties. 
D) It prevents the insurance company from contesting a policy after it has been in force for two years during the lifetime of the insured.

Question 9

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

Accepted Answer

A) Loans are only permitted for specific reasons listed in the policy. 
B) They are forgiven if the insured dies before the loans are repaid. 
C) The policyowner must pay interest on a life insurance policy loan. 
D) They must be repaid on the basis of a schedule determined at the time of the loan. 
A) Loans are only permitted for specific reasons listed in the policy. 
B) They are forgiven if the insured dies before the loans are repaid. 
C) The policyowner must pay interest on a life insurance policy loan. 
D) They must be repaid on the basis of a schedule determined at the time of the loan.

Question 10

Which of the following statements is/are true regarding exclusions in life insurance contracts?
I.Life insurance policies are remarkably restrictive,including numerous exclusions.
II.A life insurer may exclude death attributable to certain activities or hobbies disclosed on the application.

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 11

Which of the following statements about the change of plan provision in a life insurance contract is (are)true?
I.A change to a lower premium policy results in a refund of the difference in the cash values of the two policies.
II.A change to a higher premium policy requires evidence of insurability.

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 12

Sources of life insurance dividends include which of the following?
I.Excess interest earned on the assets necessary to maintain legal reserves
II.Favorable mortality experience

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 13

Which of the following statements about assignments of life insurance policies is (are)true?
I.Under a collateral assignment,the policyowner assigns a life insurance policy to secure a loan.
II.Under an absolute assignment,only limited ownership rights in a policy are transferred.

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 14

Bert purchased a life insurance policy 4 years ago.He inadvertently stated that he was 1 year younger than his actual age.If Bert dies today,how much will the insurance company pay?

Accepted Answer

A) nothing 
B) less than the policy face value 
C) the policy face value 
D) more than the policy face value 
A) nothing 
B) less than the policy face value 
C) the policy face value 
D) more than the policy face value

Question 15

Jane purchased a life insurance policy on her own life and named her daughter,Cheryl,the beneficiary.Cheryl has a history of not managing money well.Jane wants the death benefit paid to Cheryl in monthly installments over 20 years.Which settlement option should Jane pre-select for Cheryl?

Accepted Answer

A) lump sum 
B) fixed amount 
C) fixed period 
D) interest option 
A) lump sum 
B) fixed amount 
C) fixed period 
D) interest option

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

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) The policy must be reinstated within 1 year. 
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) The policy must be reinstated within 1 year.

Question 18

A life insurance policyowner may no longer need life insurance.Such a policyowner may sell the policy to a third party for more than its cash value.The purchaser becomes the new beneficiary and is responsible for subsequent premium payments.Such a financial transaction is called a(n)

Accepted Answer

A) collateral assignment. 
B) accelerated death benefits rider. 
C) absolute assignment. 
D) life settlement. 
A) collateral assignment. 
B) accelerated death benefits rider. 
C) absolute assignment. 
D) life settlement.

Question 19

Reasons for NOT purchasing an accidental death benefit rider include which of the following?
I.Most people die as a result of a disease rather than from an accident.
II.The economic value of a human life is not increased if death occurs because of an accident.

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 20

All of the following statements about the automatic premium loan provision in a life insurance policy are true EXCEPT

Accepted Answer

A) Its purpose is to prevent a policy from lapsing because of nonpayment of premium. 
B) The premium loan requires interest to be paid at a stated contractual rate. 
C) If the provision is used,the insured must show evidence of insurability to resume regular premium payments. 
D) The policy proceeds will be reduced if the premium loans are not repaid by the time of death. 
A) Its purpose is to prevent a policy from lapsing because of nonpayment of premium. 
B) The premium loan requires interest to be paid at a stated contractual rate. 
C) If the provision is used,the insured must show evidence of insurability to resume regular premium payments. 
D) The policy proceeds will be reduced if the premium loans are not repaid by the time of death.

Exam 12: Life Insurance Contractual Provisions

All of the following are common dividend options found in participating whole life insurance policies EXCEPT

Which of the following statements about life insurance settlement options is true?

Which of the following statements about beneficiary designations is true?

The cost-of-living rider typically bases increases in the policy face value on changes in the

Disadvantages of life insurance settlement options include which of the following? I.Higher yields can often be obtained elsewhere. II.Life income options have limited usefulness at younger ages.

Which of the following statements about nonforfeiture options found in life insurance policies is true?

Which of the following statements about the entire contract clause is true?

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

Which of the following statements is/are true regarding exclusions in life insurance contracts? I.Life insurance policies are remarkably restrictive,including numerous exclusions. II.A life insurer may exclude death attributable to certain activities or hobbies disclosed on the application.

Sources of life insurance dividends include which of the following? I.Excess interest earned on the assets necessary to maintain legal reserves II.Favorable mortality experience

Which of the following statements about assignments of life insurance policies is (are)true? I.Under a collateral assignment,the policyowner assigns a life insurance policy to secure a loan. II.Under an absolute assignment,only limited ownership rights in a policy are transferred.

Bert purchased a life insurance policy 4 years ago.He inadvertently stated that he was 1 year younger than his actual age.If Bert dies today,how much will the insurance company pay?

Jane purchased a life insurance policy on her own life and named her daughter,Cheryl,the beneficiary.Cheryl has a history of not managing money well.Jane wants the death benefit paid to Cheryl in monthly installments over 20 years.Which settlement option should Jane pre-select for Cheryl?

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

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

A life insurance policyowner may no longer need life insurance.Such a policyowner may sell the policy to a third party for more than its cash value.The purchaser becomes the new beneficiary and is responsible for subsequent premium payments.Such a financial transaction is called a(n)

Reasons for NOT purchasing an accidental death benefit rider include which of the following? I.Most people die as a result of a disease rather than from an accident. II.The economic value of a human life is not increased if death occurs because of an accident.

All of the following statements about the automatic premium loan provision in a life insurance policy are true EXCEPT

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