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Questions and Answers
A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?
A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?
- Accelerated Benefits
- Return of Premium
- Cost of Living
- Waiver of Premium (correct)
What action will an insurer take if an interest payment on a policy loan is not made on time?
What action will an insurer take if an interest payment on a policy loan is not made on time?
- Cancel the policy if not paid within the grace period
- Automatically add the amount of interest due to the loan balance (correct)
- Subtract from any dividends owed
- Disallow any further loans
What is the Suicide provision designed to do?
What is the Suicide provision designed to do?
- Allows the insurer the option to pay a death benefit in the event of suicide
- Safeguard the insurer from an applicant who is contemplating suicide (correct)
- Protect the insurer from ever paying a claim that results from suicide
- Decline an applicant who is contemplating suicide
All of these statements about the Waiver of Premium provision are correct EXCEPT
All of these statements about the Waiver of Premium provision are correct EXCEPT
Which of the following Dividend options results in taxable income to the policyowner?
Which of the following Dividend options results in taxable income to the policyowner?
P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?
P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?
Which of these are NOT an example of a Nonforfeiture option?
Which of these are NOT an example of a Nonforfeiture option?
What does the ownership clause in a life insurance policy state?
What does the ownership clause in a life insurance policy state?
The Accelerated Death Benefit provision in a life insurance policy is also known as a(n)
The Accelerated Death Benefit provision in a life insurance policy is also known as a(n)
The automatic premium loan provision is designed to
The automatic premium loan provision is designed to
What benefit does the Payor clause on a Juvenile Life policy provide?
What benefit does the Payor clause on a Juvenile Life policy provide?
D is the policyowner and insured for a $50,000 life insurance policy. The beneficiary is D's wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid?
D is the policyowner and insured for a $50,000 life insurance policy. The beneficiary is D's wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid?
What action can a policyowner take if an application for a bank loan requires collateral?
What action can a policyowner take if an application for a bank loan requires collateral?
Which of these provisions require proof of insurability after a policy has lapsed?
Which of these provisions require proof of insurability after a policy has lapsed?
Which of the following statements is CORRECT about accelerated death benefits?
Which of the following statements is CORRECT about accelerated death benefits?
Which of these Nonforfeiture Options continue a build-up of cash value?
Which of these Nonforfeiture Options continue a build-up of cash value?
Which of these life insurance riders allows the applicant to have excess coverage?
Which of these life insurance riders allows the applicant to have excess coverage?
The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called
The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called
M has an insurance policy that also has an outstanding policy loan at the time of M's death. The insurer will deduct the outstanding loan balance from the
M has an insurance policy that also has an outstanding policy loan at the time of M's death. The insurer will deduct the outstanding loan balance from the
A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the
A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the
N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?
N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?
Additional coverage can be added to a Whole Life policy by adding a(n)
Additional coverage can be added to a Whole Life policy by adding a(n)
An insured's inability to perform two or more activities of daily living may trigger which type of policy rider?
An insured's inability to perform two or more activities of daily living may trigger which type of policy rider?
When a life insurance policy exceeds certain IRS table values, the result would create which of the following?
When a life insurance policy exceeds certain IRS table values, the result would create which of the following?
What kind of life insurance product covers children under their parent's policy?
What kind of life insurance product covers children under their parent's policy?
Variable Whole Life Insurance can be described as:
Variable Whole Life Insurance can be described as:
When is the face amount paid under a Joint Life and Survivor policy?
When is the face amount paid under a Joint Life and Survivor policy?
K is looking to purchase Renewable Term insurance. Which of these types of term insurance may be renewable?
K is looking to purchase Renewable Term insurance. Which of these types of term insurance may be renewable?
F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed?
F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed?
What type of policy would offer a 40-year-old the quickest accumulation of cash value?
What type of policy would offer a 40-year-old the quickest accumulation of cash value?
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
A Family Income Policy is a combination of Whole Life and:
A Family Income Policy is a combination of Whole Life and:
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called:
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called:
What type of life policy covers two people and pays upon the death of the last insured?
What type of life policy covers two people and pays upon the death of the last insured?
What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?
What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?
L, aged 50, and L's spouse, 48, have one natural child and one adopted child. They purchase a Family Policy that covers L's spouse to age 65. A death benefit will NOT be paid in which of the following circumstances?
L, aged 50, and L's spouse, 48, have one natural child and one adopted child. They purchase a Family Policy that covers L's spouse to age 65. A death benefit will NOT be paid in which of the following circumstances?
When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these applies?
When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these applies?
A life policy with a death benefit that can fluctuate according to the performance of its underlying investment portfolio is referred to as:
A life policy with a death benefit that can fluctuate according to the performance of its underlying investment portfolio is referred to as:
S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level of risk. Which product would S be advised to purchase?
S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level of risk. Which product would S be advised to purchase?
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?
Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?
A variable insurance policy:
A variable insurance policy:
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20-year period. What type of policy should P purchase?
P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20-year period. What type of policy should P purchase?
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
Which of these statements describe a Modified Endowment Contract (MEC)?
Which of these statements describe a Modified Endowment Contract (MEC)?
What type of life insurance are credit policies issued as?
What type of life insurance are credit policies issued as?
Which provision allows the policyowner to change a term life policy to a permanent one without providing proof of good health?
Which provision allows the policyowner to change a term life policy to a permanent one without providing proof of good health?
What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?
What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?
D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?
D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?
Which statement is correct regarding the premium payment schedule for whole life policies?
Which statement is correct regarding the premium payment schedule for whole life policies?
Which type of policy is considered to be overfunded, as stated by IRS guidelines?
Which type of policy is considered to be overfunded, as stated by IRS guidelines?
Under a Renewable Term policy:
Under a Renewable Term policy:
Which is true concerning a Variable Universal Life policy?
Which is true concerning a Variable Universal Life policy?
When is the face amount of a Whole Life policy paid?
When is the face amount of a Whole Life policy paid?
Which of these would be considered a Limited-Pay Life policy?
Which of these would be considered a Limited-Pay Life policy?
A Limited-Pay Life policy has:
A Limited-Pay Life policy has:
The Consideration clause in a life insurance contract contains what pertinent information?
The Consideration clause in a life insurance contract contains what pertinent information?
Whose life is covered on a life insurance policy that contains a payor benefit clause?
Whose life is covered on a life insurance policy that contains a payor benefit clause?
The Accidental Death and Dismemberment (AD&D) provision in a life insurance policy would pay additional benefits if the insured:
The Accidental Death and Dismemberment (AD&D) provision in a life insurance policy would pay additional benefits if the insured:
How do life insurance companies handle cases where the insured commits suicide within the contract's stated Contestable period?
How do life insurance companies handle cases where the insured commits suicide within the contract's stated Contestable period?
Which statement regarding the Misstatement of Age provision is considered to be true?
Which statement regarding the Misstatement of Age provision is considered to be true?
When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?
When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?
Which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE?
Which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE?
S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?
S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?
What does the insuring agreement in a life insurance contract establish?
What does the insuring agreement in a life insurance contract establish?
When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?
When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?
Which of these is NOT considered to be a right given to a policyowner?
Which of these is NOT considered to be a right given to a policyowner?
N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot?
N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot?
The incontestable clause allows an insurer to:
The incontestable clause allows an insurer to:
How are surrender charges deducted in a life policy with a rear-end loaded provision?
How are surrender charges deducted in a life policy with a rear-end loaded provision?
T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?
T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?
B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of:
B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of:
In a life insurance policy, which feature states that the policy will not cover certain risks?
In a life insurance policy, which feature states that the policy will not cover certain risks?
A long-term care rider in a life insurance policy may trigger a benefit in the event of which of the following?
A long-term care rider in a life insurance policy may trigger a benefit in the event of which of the following?
The Consideration clause in a life insurance policy indicates that a policyowner's consideration consists of a completed application and:
The Consideration clause in a life insurance policy indicates that a policyowner's consideration consists of a completed application and:
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Study Notes
Life Insurance Types and Provisions
- Modified Endowment Contract (MEC) occurs when a policy exceeds IRS limits, impacting its tax treatment.
- A Term Rider allows children to be covered under their parent's life insurance policy.
- Variable Whole Life Insurance functions as both an insurance and securities product, bearing investment risk.
- Joint Life and Survivor policy pays the face amount upon the death of the last insured.
- Level Term insurance is renewable, providing stability in premiums.
Policy Variations and Features
- Decreasing Term policies have a death benefit that schedules a decline over time.
- 20-Pay Life policies accumulate cash value quickly for insured individuals, especially beneficial for younger buyers.
- Variable Universal Life policies place monthly mortality charges along with self-directed investment choices.
- A Family Income Policy merges Whole Life with Decreasing Term insurance for financial protection over time.
Premium Structures
- Limited Pay Life policies feature premium payments constrained to a specified period, offering whole life coverage.
- Universal Life policies combine adjustable premiums with an adjustable death benefit.
- Premiums for Whole Life policies are payable throughout the insured's life, ensuring lifetime coverage.
Insurance Contract Provisions
- The Conversion provision allows term policies to be switched to permanent ones without proving good health.
- An Automatic Policy Loan provision maintains policy coverage if premium payments are missed, relying on the policy's cash value.
- The Misstatement of Age provision adjusts coverage based on accurate age information to avoid incorrect premiums.
Additional Riders and Benefits
- Payor Benefit clauses cover a child if the paying parent becomes unable to provide coverage.
- Accidental Death and Dismemberment (AD&D) provisions provide extra benefits for specific accidental injuries.
- Long-term care riders activate benefits when the insured cannot perform essential activities of daily living.
Tax Implications and Rights
- Accumulated interest from dividends is taxed as ordinary income, affecting policyholders' financial planning strategies.
- Dividend options like Paid-up Additions and Cash do not incur taxes, helping policyholders strategize for financial growth.
- The Consideration clause outlines the amount of premium payments and their due dates as fundamental policy details.
Claims and Contestability
- Insurers cannot contest claims within the Contestable period on grounds of material misrepresentation.
- Suicide provisions protect insurers by disallowing claims if a suicide occurs within a defined timeframe.
Exclusions and Limitations
- Exclusions in policies limit coverage for specific risks, affecting claims processing in certain scenarios.
- Insurers require agents dealing with Variable Life policies to register with the NASD, ensuring regulatory compliance.
- Waiver of Premium provisions maintains coverage during disability but may have waiting periods and eligibility criteria.
Overall Understanding
- Life insurance encompasses various types and provisions, designed to cater to different needs and circumstances.
- Policymakers need to navigate claims, transaction types, and financial implications to optimize their strategies effectively.### Policy Ownership and Benefits
- Ownership of a life insurance policy cannot be assigned while premiums are waived.
- Policyowner retains declared dividends even when premiums are waived.
Nonforfeiture Options
- Nonforfeiture options include Extended Term, Reduced Paid-Up, and Cash Surrender.
- Life Income is NOT classified as a Nonforfeiture option.
Ownership Clause
- The ownership clause details who the policyowner is and their rights.
- It does not specify rights of beneficiaries or allow policy adjustments without conditions.
Accelerated Death Benefit
- Also referred to as a Living Benefit.
- Provides early access to death benefits under certain conditions.
Automatic Premium Loan Provision
- Aims to prevent policy lapses by drawing on cash value for premium payments.
Payor Clause in Juvenile Life Policies
- Waives premiums if the payor becomes disabled, ensuring continued coverage for the juvenile.
Policy Ownership Transfer After Divorce
- If the policyowner transfers ownership post-divorce, the ex-spouse remains the designated beneficiary unless changes are made.
Collateral for Bank Loans
- Policyowners can assign ownership to a bank to satisfy loan collateral requirements.
Reinstatement of Policies
- Proof of insurability is required for reinstatement after a policy has lapsed.
Requirements for Accelerated Death Benefits
- A terminal illness is typically necessary to qualify for accelerated benefits.
Nonforfeiture Options and Cash Value
- The Reduced Paid-Up option allows for the continuation of cash value accumulation.
Excess Coverage Riders
- Term rider enables policyholders to obtain excess coverage beyond the original policy limits.
Reinstatement Provision
- The reinstatement provision enables putting a lapsed policy back in force due to nonpayment.
Impact of Outstanding Loans on Death Benefits
- Outstanding policy loan balances are deducted from policy proceeds at the time of the insured’s death.
Policy Loan Provision
- Provides the policyowner access to funds up to the guaranteed cash value of the policy.
Claim Denial Due to Nonpayment
- If premium payments are not made, claims will be denied upon the insured's death.
Additional Coverage for Whole Life Policies
- Additional coverage can be secured through the addition of a decreasing term rider.
Activities of Daily Living and Long Term Care
- Inability to perform two or more activities of daily living may activate long-term care policy riders.
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