Questions and Answers
Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option?
What is the benefit of choosing extended term as a nonforfeiture option?
Which of the following is TRUE about a class designation?
An absolute assignment is a:
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What limits the amount that a policyowner may borrow from a whole life insurance policy?
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Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member?
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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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Which nonforfeiture option has the highest amount of insurance protection?
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J applied for a life insurance policy on January 10. When would J need to return the policy to the insurer in order to receive a full refund of premium paid?
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Who can make changes to the policy once it is in effect?
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If a life insurance policy has an irrevocable beneficiary designation, what can be said about changing the beneficiary?
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How long will the beneficiary receive payments under the single life settlement option?
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What provision in an insurance policy extends coverage beyond the premium due date?
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When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Both the primary beneficiary and the insured died in the same accident. Who would receive the death benefit?
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What kind of policy allows withdrawals or partial surrenders?
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A 40-year old man buys a whole life policy and names his wife as his only beneficiary. Who will receive the policy proceeds if he dies after the wife's death?
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Study Notes
Fixed-Amount Settlement Option
- Benefits duration is determined by the size of each installment paid out to the policyowner.
Nonforfeiture Option: Extended Term
- Provides the highest insurance protection by using policy cash value to convert to term insurance equal to the former permanent policy’s face amount.
- Coverage lasts as long as cash value can purchase term insurance.
Class Designation of Beneficiaries
- Class designations do not require beneficiaries to be named specifically, often using terms like “my children,” which can lead to ambiguity if the insured has adopted, illegitimate, or multiple relationships.
Absolute Assignment
- Involves transferring all ownership rights of a policy to another party, allowing them full control without needing insurable interest in the insured.
Policy Loan Limitations
- The amount policyowners can borrow is capped by the policy's cash value, reduced by any outstanding loans and interest.
Family Term Rider
- A rider that provides insurance coverage for every family member under a single contract.
Automatic Premium Loan Provision
- This integral provision allows a policy to stay in force through a loan secured against the cash value to cover missed premium payments, preventing unintentional lapses.
Nonforfeiture Options Comparison
- Extended Term has the same face value protection as the original policy but only for a limited period.
Free-Look Period
- The 10-day free-look period for refund starts upon delivery of the policy; returning it within this timeframe assures a full premium refund.
Policy Changes
- Only an authorized executive officer of the insurer can endorse changes to the policy; the policyowner or other parties cannot make modifications without this approval.
Irrevocable Beneficiary Designation
- Changes to an irrevocable beneficiary can only occur with the beneficiary's written consent, ensuring their rights are protected.
Single Life Settlement Option
- Payments continue until the death of the beneficiary, after which no further payments are made.
Grace Period Provision
- Mandatory grace periods ensure coverage remains active for a designated timeframe following premium due dates while allowing for late payments.
Uniform Simultaneous Death Law
- If primary and contingent beneficiaries die simultaneously, proceeds are paid to the contingent beneficiary or the insured's estate if no contingent exists.
Policy Allowing Withdrawals
- Universal life insurance allows for partial withdrawals or surrenders of the policy's cash value, offering flexible access to funds.
Estate Distribution in Absence of Beneficiary
- If the designated beneficiary predeceases the insured and no changes are made, proceeds go to the insured's estate, with the law providing for equitable distribution among heirs as applicable.
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Description
This quiz covers key concepts related to insurance policy options, including fixed-amount settlements, nonforfeiture options, and designation of beneficiaries. Test your understanding of terms like absolute assignment and policy loan limitations. Perfect for anyone studying insurance fundamentals.
