Podcast
Questions and Answers
Which statement accurately contrasts endowment and term life insurance policies?
Which statement accurately contrasts endowment and term life insurance policies?
- Both plans provide for payment of the face amount if the insured dies during the specified period.
- Both plans automatically continue insurance protection at the end of a specified period.
- Endowment policies offer insurance protection for a specified period, while term policies build cash value rapidly.
- Endowment policies build cash value rapidly in the early years; term policies do not. (correct)
A father wants to transfer ownership of his life insurance policy to his son, who will assume premium payments. How can he achieve this and protect his son from estate tax liability?
A father wants to transfer ownership of his life insurance policy to his son, who will assume premium payments. How can he achieve this and protect his son from estate tax liability?
- Execute an absolute assignment of the policy to his son. (correct)
- Appoint his son as an irrevocable primary beneficiary.
- Appoint his son as an irrevocable secondary beneficiary.
- Appoint his son as a revocable primary beneficiary.
An insurance company discovers that the policy owner was a minor at the time of application. Under what circumstances does the company generally have the right to rescind a life insurance policy?
An insurance company discovers that the policy owner was a minor at the time of application. Under what circumstances does the company generally have the right to rescind a life insurance policy?
- The insured person is killed in military action during the contestable period of the policy.
- The company discovers at any time that the policy owner was actually a minor at the time of application
- The insured person intentionally kills himself during the suicide exclusion period specified in the policy.
- The company discovers during the contestable period that the application contains a material misstatement. (correct)
Which of the following scenarios would lead a company to file an interpleader action with a court of law?
Which of the following scenarios would lead a company to file an interpleader action with a court of law?
An agent is preparing to offer a policy and determines a prospect's complete financial requirements. What selling approach is the agent using?
An agent is preparing to offer a policy and determines a prospect's complete financial requirements. What selling approach is the agent using?
Which of the following is the least important reason for requiring insurance agents to be licensed?
Which of the following is the least important reason for requiring insurance agents to be licensed?
An individual applies for a life insurance policy but fails to disclose a material fact. Under what condition is the contract valid?
An individual applies for a life insurance policy but fails to disclose a material fact. Under what condition is the contract valid?
A policy owner wants to discontinue premium payments on a permanent life insurance policy, but wants to maintain full insurance coverage for a specific period. Which provision allows for the described outcome?
A policy owner wants to discontinue premium payments on a permanent life insurance policy, but wants to maintain full insurance coverage for a specific period. Which provision allows for the described outcome?
An insured has designated a primary and a secondary revocable beneficiary for a $20,000 policy. What rights does the insured maintain?
An insured has designated a primary and a secondary revocable beneficiary for a $20,000 policy. What rights does the insured maintain?
An individual wants to provide a monthly donation to their church using the maturity value of an endowment at age 65 policy. Considering potential legal impediments, which option is most suitable?
An individual wants to provide a monthly donation to their church using the maturity value of an endowment at age 65 policy. Considering potential legal impediments, which option is most suitable?
Flashcards
Term Life Insurance
Term Life Insurance
Protection for a specific time. If the insured dies within the term, the policy pays out. If they live longer, there is no payout.
Absolute Assignment
Absolute Assignment
Transferring ownership of a life insurance policy to another party. The assignee then has rights to the policy.
Incontestability Clause
Incontestability Clause
Insurer cannot deny a claim after a policy has been in force for a certain period (usually two years), even if there was misrepresentation or fraud.
Riders
Riders
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Suicide Exclusion
Suicide Exclusion
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Unpaid Policy Loan Interest
Unpaid Policy Loan Interest
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Law of Probability
Law of Probability
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Grace Period
Grace Period
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Nonforfeiture Values
Nonforfeiture Values
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Total needs selling
Total needs selling
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Study Notes
- Both endowment and term life policies offer insurance protection limited to a specified period.
- Applications for life insurance policies do include details about non-forfeiture options.
- To pass a life insurance policy to a son and protect them from Estate Tax Liability, the father needs to appoint his son as "Absolute assignee."
- With an irrevocable beneficiary, the insured cannot discontinue premium payments without the beneficiary's permission.
- Basic settlement options: fixed amount, fixed period, life income, and interest on deposit.
- An insurance company can rescind a life insurance policy if it discovers the policy owner was a minor at the time of application.
- Requiring insurance agents to be licensed serves many purposes, but the least important is to provide additional income to the government through license fees.
- With the paid-up insurance option, premiums cease, and protection continues with a reduced amount of coverage.
- A company will allow a policy change from a higher to a lower premium if the insured presents satisfactory evidence of insurability.
- A policy allowing varied premiums, sum insured, and cash values based on investment performance is a universal life policy.
- The false statement about "Disability waiver of Premium Rider" is that the insured has to die while disabled.
- In life insurance applications, the largest amount of information requested relates to the insurability of the applicant.
- Paid-up additions affect both the cash and loan value of the policy.
- The total life coverage of a permanent basic policy can be greatly increased through a supplemental term rider.
- Life insurance companies utilize the laws of probability to estimate future death rates among members of a given group.
- In renewable term insurance, the policy owner may renew the coverage based on a higher premium.
- If an agent issues a binding receipt after receiving the initial premium on a whole life policy, it immediately provides interim insurance until the policy is issued or declined.
- Endowment life insurance and term life insurance are similar because they both provide life insurance protection for only the period of time specified in the policy contract.
- An agent who determines a prospect's complete financial requirements before offering a policy is known as total needs selling.
- Extended term insurance: provision in a permanent life insurance policy under which premiums are discontinued, and full insurance will be maintained for a specific period.
- For an endowment at age 65 policy wanting to provide a church with monthly donation you should recommend a periodic annuity option.
- The age of the applicant and the proposed sum to be insured determine the extent of medical evidence required.
- The conservation of a life insurance policy depends on most of the following except pressure selling.
- Government tax records are not a source of information to an insurance company regarding the insurability of an applicant.
- If the applicant for life insurance fails to disclose or misrepresents a material fact, the contract is valid unless the insurer can prove fraud.
- Settlement options provision may provide all of the following except proceeds held by the company, with interest payable to the beneficiary on request.
- Non-forfeiture values guarantee that any guaranteed policy values will belong to the policy owner even if premium payments are discontinued.
- Purchasing a continuous-premium, whole life policy over a limited payment, whole life policy offers more insurance protection for the same annual premiums outlay.
- An interpleader action is a remedy used to decide conflicting claims on the same insurance proceeds.
- Because of its very short duration the cash value of a yearly renewable term policy grows very fast.
- An individual on the life of his mistress does not have a legitimate insurable interest compared to the other examples.
- Riders are provisions that supplement life insurance policies, providing coverage for accidental amounts or occurrences of a different nature.
- Cash is not required for all premiums paid in the grace period, so the statement is false.
- A non-forfeiture option would occur when a policy owner discontinues premium payments for a whole life or endowment policy.
- If interest on a policy loan is not paid at the policy anniversary the insurance company may increase the present loan by the interest
- The incontestability clause prevents the company from denying a claim after the policy has been in force for 2 years.
- With a primary and secondary revocable beneficiary, the insured can add a third beneficiary at any time.
- The insurer will pay the face amount adjusted for a misstatement of age.
- If the interest on a policy loan is not paid at the policy anniversary the insurance company may increase the present loan by the interest.
- A yearly renewable term life insurance policy generally specifies that premiums shall increase every time the policy is renewed.
- True or False Statements:*
- False: Grace period applies even when premium not paid and cash values are exhausted.
- True: The law of large numbers predicts patterns in seemingly chance events.
- True: Anti-selection occurs when people in poor health wish to buy insurance.
- False: Policy does not remain in force for the full face amount for four years and 118 days, without the payment of any premiums has availed of paid up insurance option.
- True: Misstatement of age adjusts insurance amount to what premium paid at correct age would have purchased.
- True: A participating endowment provides guaranteed cash values plus extra annual distributions and pays the insured after a specified time.
- False: Group insurance does not assume every member is insurable if working a minimum number of hours each week.
- False: Endowment at age 65 policy with premium payable for limited period of 20 years does not pays the full amount after 20 years.
- False: Most life insurance applications do not request the largest amount of information is data which identifies the applicant.
- True: A policy is not rendered void by reason of misstatement of the assured's death.
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