Question 1

Nonparticipating life insurance will generally have lower initial premiums than participating life insurance.

Accepted Answer

A) True 
 B)False

Question 2

An insured must pay the specified interest rate to borrow his own "savings" when a loan is made on a whole life policy.

Accepted Answer

A) True 
 B)False

Question 3

Explain how dividends may be used when distributed to the policy owner in a participating contract.

Accepted Answer

The following is a list of how dividends

Question 4

Which of the following is false regarding the incontestable clause?

Accepted Answer

A)  Applies to misstatement of age 
B)  Does not restrict suits challenging accidental death benefits 
C)  Eliminates suits by the insurer if a more hazardous occupation is discovered by the insurer three years after the policy has been in force 
D)  Was voluntarily added to policies by some insurers 
A)  Applies to misstatement of age 
B)  Does not restrict suits challenging accidental death benefits 
C)  Eliminates suits by the insurer if a more hazardous occupation is discovered by the insurer three years after the policy has been in force 
D)  Was voluntarily added to policies by some insurers

Question 5

The irrevocable beneficiary cannot be changed by the owner.

Accepted Answer

A) True 
 B)False

Question 6

In the settlement of policy proceeds under an installment option, each payment includes (where principle equals proceeds at the date of death):

Accepted Answer

A)  principal only 
B)  interest only 
C)  cash value, principal, interest and dividends 
D)  principal and interest 
A)  principal only 
B)  interest only 
C)  cash value, principal, interest and dividends 
D)  principal and interest

Question 7

The incontestability clause in life insurance primarily serves to protect the:

Accepted Answer

A)  beneficiary 
B)  insured 
C)  insurer 
D)  annuitant 
A)  beneficiary 
B)  insured 
C)  insurer 
D)  annuitant

Question 8

Which of the following is not a standard settlement option?

Accepted Answer

A)  Interest-only payment amounts 
B)  Fixed payment amounts 
C)  Fixed period amounts 
D)  Fixed payments that in sum will equal the policy's initial face value 
A)  Interest-only payment amounts 
B)  Fixed payment amounts 
C)  Fixed period amounts 
D)  Fixed payments that in sum will equal the policy's initial face value

Question 9

Only whole life insurance policies have a grace period.

Accepted Answer

A) True 
 B)False

Question 10

The incontestable clause states that the insurer:

Accepted Answer

A)  may not contest the policy after it has been in force for five years 
B)  cannot void or contest the policy after it is issued 
C)  may contest the policy at any time 
D)  may not contest the policy after it has been in force one or two years 
A)  may not contest the policy after it has been in force for five years 
B)  cannot void or contest the policy after it is issued 
C)  may contest the policy at any time 
D)  may not contest the policy after it has been in force one or two years

Question 11

The entire-contract provision makes the application for life insurance a part of the contract itself if attached.

Accepted Answer

A) True 
 B)False

Question 12

The entire contract clause in life insurance is designed to:

Accepted Answer

A)  make sure the entire contract (written and oral) influences the interpretation of the contract 
B)  bar any incorporation by reference of any documents not attached to the contract 
C)  require that the policy application be forwarded directly to the beneficiary 
D)  require that any policy illustrations provided by the agent become a part of the contract 
A)  make sure the entire contract (written and oral) influences the interpretation of the contract 
B)  bar any incorporation by reference of any documents not attached to the contract 
C)  require that the policy application be forwarded directly to the beneficiary 
D)  require that any policy illustrations provided by the agent become a part of the contract

Question 13

The guaranteed insurability option allows the insured to:

Accepted Answer

A)  purchase additional amounts of life insurance without proof of insurability 
B)  purchase life insurance for his friends without proof of insurability 
C)  retain coverage even if the insurer learns that the insured lied on the insurance application 
D)  receive a discount for taking an extensive physical examination before coverage begins 
A)  purchase additional amounts of life insurance without proof of insurability 
B)  purchase life insurance for his friends without proof of insurability 
C)  retain coverage even if the insurer learns that the insured lied on the insurance application 
D)  receive a discount for taking an extensive physical examination before coverage begins

Question 14

One life insurance dividend option is to allow dividends to accumulate with compound interest with the insurance company.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is not an advantage of using dividends to purchase paid-up additions of life insurance?

Accepted Answer

A)  There are no medical exams. 
B)  There are no acquisition fees and expenses are minimal. 
C)  Paid-up additions have their own cash value. 
D)  They produce taxable income. 
A)  There are no medical exams. 
B)  There are no acquisition fees and expenses are minimal. 
C)  Paid-up additions have their own cash value. 
D)  They produce taxable income.

Question 16

The suicide clause states that the life insurer will not have to pay benefits in the event death is caused by suicide after a short (one or two year) waiting period.

Accepted Answer

A) True 
 B)False

Question 17

Brak purchased a $25,000 life insurance policy from INSCO on January 1. After failing his introductory insurance class, he committed suicide on December 15 of the same year. At the time of his death, he had paid $1,500 in premiums, and his policy had a cash value of $600. How much will INSCO pay Brak's beneficiary, assuming that the policy contained a 2-year suicide clause?

Accepted Answer

A)  $600 
B)  $1,500 
C)  $23,500 
D)  $1,500 plus interest 
A)  $600 
B)  $1,500 
C)  $23,500 
D)  $1,500 plus interest

Question 18

What is/are the advantage(s) to purchasing an annuity from your life insurer by using the cash value in your whole life policy, rather than cashing in the policy and using the withdrawn cash values to purchase an annuity from another company?

Accepted Answer

A)  No new acquisition costs are charged, and possibly better annuity assumptions 
B)  No new acquisition costs are charged, and annuity prices are guaranteed to be low 
C)  No new acquisition costs is the only advantage 
D)  Cheaper annuity pricing is the only advantage 
A)  No new acquisition costs are charged, and possibly better annuity assumptions 
B)  No new acquisition costs are charged, and annuity prices are guaranteed to be low 
C)  No new acquisition costs is the only advantage 
D)  Cheaper annuity pricing is the only advantage

Question 19

The gender of the person receiving periodic income payments is a factor in the settlement of life insurance proceeds under the:

Accepted Answer

A)  fixed period option 
B)  interest option 
C)  fixed amount option 
D)  life income option 
A)  fixed period option 
B)  interest option 
C)  fixed amount option 
D)  life income option

Question 20

One life insurance nonforfeiture option allows the insured to convert a whole life policy into term insurance.

Accepted Answer

A) True 
 B)False

Exam 16: Standard Life Insurance Contract Provisions and Options

Nonparticipating life insurance will generally have lower initial premiums than participating life insurance.

An insured must pay the specified interest rate to borrow his own "savings" when a loan is made on a whole life policy.

Explain how dividends may be used when distributed to the policy owner in a participating contract.

Which of the following is false regarding the incontestable clause?

The irrevocable beneficiary cannot be changed by the owner.

In the settlement of policy proceeds under an installment option, each payment includes (where principle equals proceeds at the date of death):

The incontestability clause in life insurance primarily serves to protect the:

Which of the following is not a standard settlement option?

Only whole life insurance policies have a grace period.

The incontestable clause states that the insurer:

The entire-contract provision makes the application for life insurance a part of the contract itself if attached.

The entire contract clause in life insurance is designed to:

The guaranteed insurability option allows the insured to:

One life insurance dividend option is to allow dividends to accumulate with compound interest with the insurance company.

Which of the following is not an advantage of using dividends to purchase paid-up additions of life insurance?

The suicide clause states that the life insurer will not have to pay benefits in the event death is caused by suicide after a short (one or two year) waiting period.

What is/are the advantage(s) to purchasing an annuity from your life insurer by using the cash value in your whole life policy, rather than cashing in the policy and using the withdrawn cash values to purchase an annuity from another company?

The gender of the person receiving periodic income payments is a factor in the settlement of life insurance proceeds under the:

One life insurance nonforfeiture option allows the insured to convert a whole life policy into term insurance.

Introduction to Enterprise Risk Management and Insurance

Risk Identification

Risk Assessment and Pooling

Risk-Handling Techniques: Loss Control, Risk Transfer, and Loss Financing

Risk-Handling Techniques: Diversification and Hedging

Fundamentals of Insurance

Insurable Perils and Insuring Organizations

Insurance Functions

Insurance Markets: Economics and Issues

Insurance Regulation

Insurance Contracts

The Personal Auto Policy

Homeowners Insurance

Professional Financial Planning

Life Insurance Policies

Annuities

Health Insurance and Disability Income

Employee Benefits

Social Security

Unemployment and Workers Compensation Insurance

Commercial Property Insurance

Commercial Liability Insurance

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