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Exam 12: Life Insurance and Contractual Provisions

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Question 21

Multiple Choice

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Which of the following is a common dividend option found in a participating life insurance policy?

A) reduced paid-up insurance
B) fixed period
C) paid-up additions
D) life income

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Question 22

Multiple Choice

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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?

A) waiting period
B) grace period
C) guaranteed purchase option
D) reinstatement clause

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Question 23

Multiple Choice

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Which of the following statements is (are) true concerning settlement options? I.A straight life annuity provides the lowest amount of periodic income of all the life income options. II.Fixed-period and fixed-amount are life income options.

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

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

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

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

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.

Which of the following statements about the guaranteed purchase option is true?

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

Which of the following statements about beneficiary designations is (are) true? I.The primary beneficiary is entitled to the death proceeds of a life insurance policy only if the contingent beneficiary dies before the insured. II.If a revocable beneficiary designation is used,the policyowner must obtain the beneficiary's permission to change the beneficiary.

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?

Which of the following statements is true regarding an automatic premium loan provision?

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

The transfer of all ownership rights in a life insurance policy can be accomplished through a(n)

Which of the following statements is (are) true concerning the automatic premium loan provision? I.Unlike other policy loans,interest is not charged on automatic premium loans. II.The basic purpose of an automatic premium loan is to prevent a life insurance policy from lapsing.

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

Beth purchased a participating life insurance policy 6 years ago.Her life insurance needs have increased,but she has developed a medical condition that makes it impossible for her to purchase more life insurance at affordable premiums.Which dividend option makes sense for Beth to use given her medical condition?

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.

Marcus is concerned that inflation will erode the purchasing power of the face value of his life insurance policy.His agent suggested that Marcus add a provision that allows him to purchase one-year term insurance equal to the percentage change in the consumer price index without having to demonstrate insurability.This provision is called a(n)