Exam 12: Life Insurance Contractual Provisions

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 is a common dividend option found in a participating life insurance policy?

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

The practice of buying the life insurance policy of a terminally ill insured at a discount is referred to as a

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

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.

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.

Which of the following statements about the waiver-of-premium provision in life insurance is true?

Which of the following statements about the assignment of a life insurance policy 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.

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.

Which of the following statements about a typical accidental death benefit rider is (are) true? I.Accidental injury must be the cause of death for the increased benefit to be paid. II.The accidental death must occur prior to some specified age for the increased benefit to be paid.

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

Which of the following statements about accelerated death benefits riders is (are) true? I.The benefit paid is usually less than the full face amount. II.Several different medical conditions may trigger the payment of benefits.

Cal purchased a whole life policy 6 years ago. The policy requires annual premium payments. Cal forgot to pay the premium that was due 2 weeks ago. He wonders if his life insurance is still in force. Which life insurance policy provision is designed to keep the policy in force for a short time even if the premium payment is late?

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.

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?

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

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

A life insurance policyholder may no longer need life insurance. Such a policyholder 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)

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