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If the interest on a policy loan is not paid at the policy anniversary, what may the insurance company do?

Increase the present loan by interest

What is the incontestability clause in life insurance?

It prevents the company from denying a claim after the policy has been in force for 2 years.

What happens in the event of misstatement of age in a life insurance policy?

The insurer will pay the face amount adjusted for the misstatement of age.

What generally happens to premiums when a yearly renewable term life insurance policy is renewed?

Premiums shall increase every time the policy is renewed.

What does a binding receipt issued by an agent signify?

It immediately provides interim insurance that remains in effect until the policy is issued or the application is declined.

How do life insurance companies use probability?

They estimate future death rates among members of a given group.

What is true about adding a beneficiary to a life insurance policy?

The insured can add a third beneficiary at any time.

What can an insured do without the permission of an irrevocable beneficiary?

Discontinue premium payment.

What must a father appoint if he wants to pass his life insurance policy to his son to protect against estate tax liability?

Absolute assignee.

What happens if a policy owner elects the paid-up insurance option?

The premiums cease and protection continues with a reduced amount of coverage.

What is required for a policy change from a higher premium to a lower premium?

Presents satisfactory evidence of insurability.

What is a policy called that allows varying levels of premium or sum insured based on investment performance?

Universal life policy.

How do paid-up additions affect cash value?

They don’t affect both endowment and term life insurance the loan or cash value of the policy.

Which of the following is not a function of the life insurance application?

To give details pertaining to non-forfeiture options.

What is true for both endowment and term life insurance policies?

Insurance protection will be limited to a specified period.

What is the least important reason for requiring insurance agents to be licensed?

To provide additional income to the government through the license fees.

Under what condition can an insurance company rescind a life insurance policy?

The company discovers at any time that the policy owner was actually a minor at the time of application.

What are the basic settlement options in life insurance?

Fixed amount fixed period life income interest or deposit.

What information is most requested in life insurance applications?

Data which relates to the insurability of the applicant.

How can the total life coverage of a permanent policy be increased?

Through a supplemental term rider.

If the owner of a life insurance policy wants to provide a monthly donation to a church after maturity, which option should be recommended?

Interest option.

What determines the extent of medical evidence required in life insurance?

The age of the applicant and the proposed sum to be insured.

What does the policy owner have in renewable term insurance?

Renew the coverage based on a higher premium.

What is a similarity between endowment life insurance and term life insurance?

Both provide life insurance protection for only the period of time specified in the policy contract.

What is total needs selling in insurance?

An agent determines a prospect's complete financial requirements before offering a policy.

Which statement about the disability waiver of premium rider is false?

The insured has to die while disabled.

What does not contribute to the conservation of a life insurance policy?

Pressure selling.

Which is not a source of information about insurability for an insurance company?

Government tax records.

What provision allows premiums to be discontinued while maintaining full insurance for a specified period?

Extended term insurance.

What is valid if life insurance application misrepresents a material fact?

Valid unless the insurer can prove fraud.

What are the separate provisions that supplement life insurance policies called?

Riders.

Which statement about cash values of life insurance policies is false?

Because of the very short duration, the cash value of a yearly renewable term policy grows very fast.

What does the settlement options provision not provide for?

Proceeds held by the company, with interest payable to the beneficiary on request.

What is an interpleader action used for in insurance?

To decide conflicting claims on the same insurance proceeds.

What do non-forfeiture provisions guarantee?

Any guaranteed policy values will belong to the policy owner even if premium payments are discontinued.

What advantage does a continuous premium whole life policy have over a limited payment whole life policy?

More insurance protection for the same premiums outlay.

What may happen if interest on a policy loan is not paid at the policy anniversary?

Increase the present loan by interest.

Which statement regarding insurance premiums is false?

Cash is required for all the premiums paid in the grace period.

Which of the following does not have legitimate insurable interest?

An individual on the life of his mistress.

When is a non-forfeiture option ordinarily selected?

When discontinuing premium payment for a whole life or endowment policy.