Exam Sim Life Insurance Policy, Provisions, Options and Riders - Practice Exam

Which of the following statements abt a suicide clause in a life insurance policy is TRUE?

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a. Suicide is covered for a specific period of yrs and excluded thereafter

b. Suicide is covered as long as the policy is in force

c. Suicide is excluded as long as the policy is in force

d. Suicide is excluded for a specific period of yrs and covered thereafter

d

Using a class designation for beneficiaries means

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a. Naming an estate as the beneficiary

b. Naming each beneficiary by his/her name

c. Naming beneficiaries as a group

d. Not naming beneficiaries as a group

c

How long will the beneficiary receive payments under the single life settlement option?

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a. Until the insured’s age 100

b. Until the beneficiary’s death

c. Until the insured’s death

d. For a specific period of time

b

An individual is purchasing a permanent life insurance policy w/ a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy?

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a. Nonforfeiture options

b. Guaranteed insurability options

c. Dividend options

d. Guaranteed renewable options

b

The type of settlement option which pays throughout the lifetimes of 2 or more beneficiaries is called

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a. Joint and survivor

b. Fixed period

c. Fixed amount

d. Joint life

a

Which nonforfeiture option provides coverage for the longest period of time?

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a. Extended term

b. Paid-up option

c. Accumulated at interest

d. Reduced paid-up

d

The paid-up addition option uses the dividend

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a. To purchase a 1 year term insurance in the amount of the cash value

b. To reduce the next year’s premium

c. To accumulate additional savings for retirement

d. To purchase a smaller amount of the same type of insurance as the original policy

d

Which of the following statements is TRUE concerning the Accidental Death Rider?

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a. It is aka a triple indemnity rider

b. This rider is only available to insured over the age of 65

c. It is only available in group insurance

d. It will pay double/triple the face amount

d

Which rider could pay life insurance benefits to an insured while the insured is still living?

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a. Payor Benefit Rider

b. Accelerated Death Benefit Rider

c. Accidental Death Rider

d. Cost of Living Rider

b

What is the purpose of a suicide provision within a life insurance policy?

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a. To limit the insurer’s liability after the 2 year waiting period

b. To deter the policyowner from committing suicide

c. To protect the policyowner

d. To protect the insurer from persons who purchase life insurance w/ the intention of committing suicide

d

When an insured under a life insurance policy died, the designated beneficiary received the face amount of the policy, as well as a refund of all of the premiums paid. Which rider is attached to the policy?

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a. Decreasing term

b. Accidental death

c. Return of premium

d. Cost of living

c

Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insured’s death?

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a. A business partner of the insured

b. The wife of the deceased insured

c. The former wife of the deceased insured

d. A minor son of the insured

d

The Ownership provision entitles the policyowner to do all of the following EXCEPT

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a. Set premium rates

b. Receive loan policy

c. Assign the policy

d. Designate a beneficiary

a

Under an extended term nonforfeiture option, the policy cash value is converted to

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a. A lower face amount than the whole life policy

b. A higher face amount than the whole life policy

c. The same face amount as in the whole life policy

d. The face amount equal to the cash value

c

The provision which states that both the policy and a copy of the app. form the contract between the policyowner and the insurer is called the

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a. Complete contract

b. Entire contract

c. Total contract

d. Aleatory contract

b

An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy’s cash value, which is currently $20,000. What would be the face amount of the new term policy?

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a. $20,000

b. $25,000

c. $50,000

d. The face amount will be determined by the insurer

c

An applicant for insurance misstates her age at the time her life insurance app. is taken. This misstatement may result in

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a. Recession of the policy

b. Adjustment in the death benefit

c. No charge

d. Automatic lapse

b

The 2 types of assignments are

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a. Absolute and collateral

b. Absolute and partial

c. Complete and partial

d. Complete and proportionate

a

Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?

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a. The beneficiary must pay interest to the insurer

b. The beneficiary will receive the lump sum, plus interest

c. The primary beneficiary will receive the death benefit and the secondary beneficiaries will share the interest payments

d. The beneficiary will only receive payments of the interest earned on the death benefit

d

At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future w/out having to prove insurability. This rider is called

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a. Guaranteed insurability

b. Waiver of cost of insurance

c. Accelerated benefits

d. Cost of living

a

If a life policy allow the policyowner to make periodic additions to the face amount at standard rates, w/out proving insurability, the policy includes a

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a. Nonforfeiture option

b. Guaranteed insurability rider

c. Paid-up additions option

d. Cost of living provision

b

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?

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a. The beneficiary will receive 2/3 of the total benefit, w/ the final 1/3 payable when the 1st beneficiary dies

b. 1 of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies

c. The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive

d. The beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid over time

c

An insured purchased a life policy in 2010 and died in 2020. The insurance company discovers at that time the insured has misstated info. about her insurance history on the app. What will the insurer do?

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a. Refuse to pay the death benefit bc of the misstatement on the app.

b. Pay a decreased death benefit

c. Sue for the right to not pay the death benefit

d. Pay the death benefit

d

Which of the following statements is TRUE abt a policy assignment?

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a. It transfers rights of ownership from the owner to another person

b. It is the same as a beneficiary designation

c. It permits the beneficiary to designate the person to receive the benefits

d. It authorizes an agent to modify the policy

a

During partial withdrawal from a universal life policy, which portion will be taxed?

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a. Loan

b. Interest

c. Cash value

d. Principal

b

A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Price Index, is called

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a. Payor rider

b. Cost of living rider

c. Accelerated benefit rider

d. Living need rider

b

What type of account will most likely be est. for a minor?

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a. Credit life

b. Estate planning

c. Trust

d. Annuity

c

The sole beneficiary of a life insurance policy dies before the insured. If the policyowner fails to change the beneficiary before the insured’s death, the proceeds of the policy will go to

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a. The state

b. The beneficiary’s estate

c. The insured’s estate

d. Probate

c

Which of the following is true abt warranties?

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a. They are true to the best of the agent’s knowledge

b. They are true to the best of the applicant’s knowledge

c. They are guaranteed to be true

d. If they aren’t true, the insurer must file w/ court to void the policy

c

When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance w/ what face amount?

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a. The same as the original policy minus the cash value

b. Equal to the original policy for as long as the cash values will purchase

c. In lesser amounts for the remaining policy term of age 100

d. Equal to the cash value surrendered from the policy

b

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to

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a. Purchase a single premium policy for a reduced face amount

b. Purchase a term rider to attach to the policy

c. Pay back all premiums owed plus interest

d. Receive payments for a fixed amount

a

The insured under a $100,000 life insurance policy w/ a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any matter. In this case, what will the policy beneficiary receive?

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a. $0

b. $50,000 (50% of the policy value)

c. $100,000

d. $300,000 (triple the amount of policy value)

c

Statements made by an applicant for a life insurance policy which are true to the best of one’s knowledge are referred to as

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a. Info.

b. Representations

c. Facts

d. Warranties

b

An insured who had a life insurance policy for $1 million died. In filing the claim, his wife and children discovered that there was no beneficiary named on the policy. What will happen to the death benefit in this case?

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a. It will go to the insured’s estate

b. It will be divided among his children

c. It will be automatically paid to the insured’s surviving family

d. The insurer will retain the benefit

a

The dividend option in which the policyowner uses dividends to purchase a term policy for 1 year is referred to as the

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a. Paid-up additions

b. 1 year term option

c. Paid-up option

d. Accelerated endowment

b

What is the purpose of a free-look period in insurance policies?

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a. It allows the insured 10 days to pay the initial premium

b. It allows the insurer to temporarily suspend coverage after an insured’s disability

c. It allows the insurer to cancel coverage if a misrepresentation is discovered

d. It allows the insured to reject the policy w/ a full refund

d

The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this?

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a. Reduction of premium

b. Paid-up addition

c. Accumulation at interest

d. Cash option

a

When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option?

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a. Life income period certain

b. Extended term

c. Fixed amount

d. Fixed period

c

An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance company had what provision?

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a. Common Disaster

b. Accidental Death

c. Survivor Life

d. Second-to-Die

a

Which of the following explains the policyowner’s right to change beneficiaries, choose options, and receive proceeds of a policy?

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a. Assignment Rights

b. Owner’s Rights

c. The Entire Contract Provision

d. The Consideration Clause

b

Which of the following protects the insured from an unintentional policy lapse due to a nonpayment premium?

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a. Extended term

b. Reinstatement

c. Reduced paid-up option

d. Automatic premium loan

d

An insured states her age as 40 on the app. When she dies, the insurer discovers that she was actually only 37 at the time of app. What will the insurance company do?

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a. Pay a decreased death benefit

b. Pay an increased death benefit

c. Pay nothing since there was a material misrepresentation on the app.

d. Pay the death benefit in the amount that the premium at the correct age would have purchased

d

A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change?

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a. Inflation Rider

b. Cost of Living Rider

c. Value Adjustment Rider

d. Return of Premium Rider

b

Which of the following, when attached to a permanent life insurance policy, allows the policyowner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members?

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a. Guaranteed insurability rider

b. Change of insured rider

c. Term rider

d. Accidental death and dismemberment rider

c

Which of the following is true regarding a single life settlement option?

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a. Proceeds are paid out in a lump sum

b. It provides income for a specified period of time

c. It provides income the beneficiary cannot outlive

d. Payments continue until the entire principal exhausted

c

Which of the following riders would NOT cause the Death Benefit to increase?

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a. Guaranteed Insurability Rider

b. Cost of Living Rider

c. Accidental Death Rider

d. Payor Benefit Rider

d

An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy’s cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have?

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a. Universal life

b. Adjustable life

c. Term life

d. Limited pay

a

An absolute assignment is a

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a. Transfer of some ownership rights in a policy

b. Change of beneficiary

c. Change of insurer

d. Transfer of all ownership rights in a policy

d

What is the other term for the cash payment settlement option?

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a. Proceeds

b. Lump sum

c. Principal amount

d. Face amount

b

What is the purpose of a fixed-period settlement option?

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a. To provide a guaranteed income for a certain amount of time

b. To settle the insurance company’s liability

c. To provide a guaranteed income for life

d. To provide a guaranteed amount of money each month

a

A business owner was trying to obtain a bank loan to fund the purchase of a new business facility, but the bank required proof of additional assets to secure the loan. The business owner then decided to use her $250,000 life insurance policy to secure the loan. Which provision makes this possible?

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a. Ownership provision

b. Collateral assignment

c. Insurable interest

d. Modification clause

b

What limits the amount that a policyowner may borrow from a whole life insurance policy?

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a. Amount stated in the policy

b. Face amount

c. Cash value

d. Premiums paid

c

According to the Entire Contract provision, a policy must contain

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a. A declarations page w/ a summary of insureds

b. Buyer’s guide to life insurance

c. Listing of the insured’s former insurer(s) for incontestability provisions

d. A copy of the original app. for insurance

d

Regarding the free-look provision, the insurance company

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a. Must allow the policyowner to return the policy for a full refund

b. Cannot charge a premium after 10 days

c. Must issue a free policy for 30/31 days

d. Must issue a free policy for 10 days

a

A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision?

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a. Waiver of premium

b. Incontestability period

c. Assignment

d. Automatic premium loan

d

A couple owns a life insurance policy with a Children’s Term rider. Their daughter is reaching the max. age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability?

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a. Her parents’ federal income tax receipts

b. Medical exam and parents’ medical history

c. Proof of insurability is not required

d. Medical exam

c

A father owns a life insurance policy on his 15 yr old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums?

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a. The insured’s premiums will be waived until she is 21

b. The premiums will become tax deductible until the insured’ s 18th bday

c. Since it is the policyowner, and not the insured, who has become disabled, the life insurance policy will not be affected

d. The insured will have to pay premiums for 6 months. If at the end of this period the father is still disabled, the insured will be refunded the premiums

a

When a policyowner designates a group of individuals as the beneficiary of a life insurance death benefit w/out specifically naming the individuals, this is called

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a. Irrevocable designation

b. Stirpes designation

c. Class designation

d. Revocable designation

c

If the policyowner, the insured, and the beneficiary under a life insurance policy are 3 different people, who has the ownership rights?

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a. Insured

b. Policyowner

c. The insured and the policyowner

d. Beneficiary

b

Life income joint and survivor settlement option guarantees

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a. Income for 2 or more recipients until they die

b. Payment of interest on death proceeds

c. Payout of the entire death benefit

d. Equal payments to all recipients

a

An insured stops making payments on a loan taken from his cash value policy. What will most likely happen?

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a. The insurer will increase the interest rate on the loan and charge a penalty

b. The insurer will not permit the policyowner to take out any more loans

c. The policy will be reduced to an extended term option

d. The policy will terminate when the loan amount w/ interest equals or exceeds the cash value

d

A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the

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a. Revocable beneficiary

b. Secondary beneficiary

c. Contingent beneficiary

d. Irrevocable beneficiary

a

If an insured continually uses the automatic premium loan option to pay the policy premium,

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a. The insurer will increase the premium amount

b. The policy will terminate when the cash value is reduced to nothing

c. The face amount of the policy will be reduced by the automatic premium loan amount

d. The cash value will continue to increase

b

Another name for the Accelerated Death Benefit Rider if it is part of the policy is

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a. Nonforfeiture

b. Settlement

c. Death Benefit

d. Living Benefit

d

An insured purchased a life insurance policy on his life naming his wife as primary beneficiary, and his daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?

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a. If the insured died from accidental means

b. If the primary beneficiary predeceased the insured

c. When the insured dies, the primary and contingent beneficiaries share death benefits equally

d. W/ the primary beneficiary’s written consent

b

In a case where the primary beneficiary predeceases the insured, in the event of the insured’s death, the death benefit proceeds will be paid to

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a. The policyowner

b. The insurance company

c. The contingent beneficiary

d. The insured’s spouse

c

If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 yrs before being exhausted, what settlement option should the beneficiary select?

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a. Fixed period

b. Life w/ period certain

c. Fixed amount

d. Interest only

a

What required provision protects against unintentional lapse of the policy?

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a. Payment of premiums

b. Reinstatement

c. Grace period

d. Assignment

c

If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used?

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a. Fixed period

b. Fixed amount

c. Lump sum

d. Life income

c

What is the advantage of reinstating a policy instead of applying for a new one?

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a. The face amount can be increased

b. The cash values have gained interest while the policy was lapsed

c. The original age is used for premium determination

d. Proof of insurability is not required

c

Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary?

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a. Single life

b. Fixed-amount

c. Life income w/ period certain

d. Joint and survivor

c

Which entity determines the amount of accelerated death benefits that will be paid to an insured?

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a. Employers offering plans that include accelerated death benefits

b. Federal law

c. State law

d. The insurer

d

An insured has had a life insurance policy that he purchased 3 yrs ago when he was 40 yrs old. He is killed in an automobile accident, and it is discovered that he is actually 45 yrs old, and not 43, as stated on the app. What will the company do?

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a. Pay the full death benefit and refund excess premium

b. Pay a reduced death benefit

c. Pay the full death benefit

d. Pay nothing; there was a misrepresentation on the app.

b

All of the following are beneficiary designations EXCEPT

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a. Primary

b. Specified

c. Tertiary

d. Contingent

b

Which of the following statements abt the reinstatement provision is true?

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a. It requires that the policyowner to pay all overdue premiums w/ interest before the policy is reinstated

b. It permits reinstatement within 10 yrs after a policy has lapsed

c. It provides for reinstatement of a policy regardless of the insured’s health

d. It guarantees the reinstatement of a policy that has been surrendered for cash

a

When calculating the amount a policyowner may borrow from a variable life policy, what must be subtracted from the policy’s cash value?

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a. The face amount

b. Mortality cost

c. The cash surrender amount

d. Outstanding loans and interest

d

Upon the submission of a death claim under a life insurance policy, when should the insurer pay the policy benefit?

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a. Within 2 yrs of the date loss

b. Immediately after receiving written proof of loss

c. On the next anniversary of the policy

d. After the estate of the insured has been settled

b

Which is true about a spouse term rider?

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a. The rider is decreasing term insurance

b. Coverage is allowed up to age 75

c. The rider is usually lvl term insurance

d. Coverage is allowed for an unlimited time

c

When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several yrs later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died 1st. Which of the following would receive the death benefit?

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a. The insured’s estate

b. The primary beneficiary’s estate

c. The insured’s contingent beneficiary

d. The insurance company

c

The law states that an insurer is allowed to pay the entire Death Benefit to the insured if they qualify to use the Accelerated Death Benefit Rider; however, most insurers limit the amount of the Death Benefit paid to

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a. 75%

b. 30%

c. 50%

d. 60%

c

All of the following are true regarding the guaranteed insurability rider EXCEPT

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a. The insured may purchase additional coverage at the attained age

b. The insured may purchase additional insurance up to the amount specified in the base policy

c. It allows the insured to purchase additional amounts of insurance w/out proving insurability only at specified dates or events

d. This rider is available to all insureds w/ no additional premium

d

If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back?

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a. The policy beneficiary takes over the loan payments

b. The policy is rendered null and void

c. The balance of the loan will be taken out of the death benefit

d. The policy beneficiary receives the full death benefit

c

Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option?

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a. Size of each installment

b. Predetermined length of time stated in the contract

c. Length of income period

d. Amount of interest

a

Which of the following allows the insurer to relieve a minor insured from premium payments if the minor’s parents have died or become disabled?

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a. Jumping Juvenile

b. Juvenile Premium Provision

c. Waiver of Premium

d. Payor Benefit

d

The automatic premium loan provision is activated at the end of the

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a. Elimination period

b. Policy period

c. Grace period

d. Free-look period

c

An insured had a $10,000 term life policy. The annual premium of $200 was due on Feb. 1; however, the insured failed to pay the premium. He died on Feb. 28. How much would the beneficiary receive from the policy?

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a. $0

b. $200

c. $9,800

d. $10,000

c

Which of the following is true abt the mandatory free look in a Life Insurance policy?

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a. It is optional on all life insurance policies

b. It commences when the policy is delivered

c. It commences when the app. is signed

d. It applies only to term life insurance policies

b

If a life insurance policy has an irrevocable beneficiary designation,

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a. The beneficiary cannot be changed for at least 2 yrs

b. The owner can always change the beneficiary at will

c. The beneficiary cannot be changed

d. The beneficiary can only be changed w/ written permission of the beneficiary

d

Which of the following is true regarding the spendthrift clause in life insurance policies?

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a. It is the same as irrevocable settlement clause

b. It can protect the policy proceeds from creditors of the beneficiary

c. It allows the beneficiary to select a different settlement option

d. It is only used when the beneficiary is a minor

b

Representations are written or oral statements made by the applicant which

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a. Are immaterial to the actual acceptability of the insurance contract

b. Are considered true to the best of the applicant’s knowledge

c. Are guaranteed to be true

d. Are found to be false after further investigation

b

An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability is provided. Which policy provision allows this?

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a. Waiver of premium provision

b. Incontestable clause

c. Grace period

d. Reinstatement provision

d

Which of the following is true of a children’s rider added to an insured’s permanent life insurance policy?

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a. Each child covered must show evidence of insurability

b. It is term coverage that is convertible to permanent insurance at or prior to the child reaching the max. coverage age

c. It is permanent insurance

d. The policy covers only the natural children of the insured

b

Which of the following statements is TRUE concerning irrevocable beneficiaries?

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a. They may be changed at any time

b. They can never be charged

c. They may be changed only on the anniversary date of the policy

d. They can be changed only w/ the written consent of that beneficiary

d

An individual purchased a life insurance policy on his life naming his wife as primary beneficiary, and their daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?

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a. If the primary beneficiary predeceases the insured

b. The primary and contingent beneficiaries share death benefits equally

c. W/ the primary beneficiary’s written consent

d. If the insured dies from an accident

a

The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the

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a. Insuring clause

b. Misstatement of Age clause

c. Incontestability clause

d. Reinstatement clause

c

Which of the following is NOT typically excluded from life policies?

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a. Self-inflicted death

b. Death that occurs while a person is committing a felony

c. Death due to war or military service

d. Death due to plane crash for a fare-paying passenger

d

The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose?

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a. Interest only option

b. Life income w/ period certain

c. Joint and survivor

d. Fixed amount option

a

When a life insurance policy stipulates that the beneficiary will receive payments in specified installments or for a specified number of yrs, what provision prevents the beneficiary from changing or borrowing from the planned installments?

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a. Settlement option

b. Accelerated benefit provision

c. Loan provision

d. Spendthrift provision

d

Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early?

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a. Paid-up additions

b. Dividend Accumulation option

c. Paid-up option

d. Accumulation at Interest

c

What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military?

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a. Limited benefit

b. Aviation

c. Hazardous occupation

d. War or military service

d