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Questions and Answers
What happens to the amount of insurance in case of misstatement of age?
What happens to the amount of insurance in case of misstatement of age?
Which type of policy guarantees cash values and provides additional distributions to the insured?
Which type of policy guarantees cash values and provides additional distributions to the insured?
What is one main assumption in group insurance regarding the insurability of each member?
What is one main assumption in group insurance regarding the insurability of each member?
What occurs when a policyholder misstates their age?
What occurs when a policyholder misstates their age?
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In most life insurance applications, which type of information is primarily requested?
In most life insurance applications, which type of information is primarily requested?
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What factors determine the extent of medical evidences required for life insurance?
What factors determine the extent of medical evidences required for life insurance?
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Which factor does not influence the conservation of a life insurance policy?
Which factor does not influence the conservation of a life insurance policy?
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Which of the following is not a source of information for insurability of an applicant?
Which of the following is not a source of information for insurability of an applicant?
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What happens if a life insurance applicant misrepresents material facts?
What happens if a life insurance applicant misrepresents material facts?
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Which is not a settlement option provided by the policy?
Which is not a settlement option provided by the policy?
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What do non-forfeiture provisions guarantee for a policyowner?
What do non-forfeiture provisions guarantee for a policyowner?
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Purchasing a continuous-premium whole life policy offers which advantage to the policyowner?
Purchasing a continuous-premium whole life policy offers which advantage to the policyowner?
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Which option is the least important reason for requiring that insurance agents be licensed?
Which option is the least important reason for requiring that insurance agents be licensed?
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What happens when the policy owner elects the paid up insurance option?
What happens when the policy owner elects the paid up insurance option?
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What is required for a policy change from a higher premium to a lower premium?
What is required for a policy change from a higher premium to a lower premium?
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What is a policy that allows variation in premiums, sum insured, and cash values based on investment performance?
What is a policy that allows variation in premiums, sum insured, and cash values based on investment performance?
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Which statement about the 'Disability Waiver of Premium Rider' is false?
Which statement about the 'Disability Waiver of Premium Rider' is false?
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What is the largest amount of information requested in most life insurance applications?
What is the largest amount of information requested in most life insurance applications?
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How do paid-up additions affect the policy?
How do paid-up additions affect the policy?
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What is the purpose of interpleader actions that a company may file with the court?
What is the purpose of interpleader actions that a company may file with the court?
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Which rider significantly increases the total life coverage of a permanent basic policy?
Which rider significantly increases the total life coverage of a permanent basic policy?
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Which statement about the cash value growth of different policies is false?
Which statement about the cash value growth of different policies is false?
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Which scenario does not demonstrate a legitimate insurable interest?
Which scenario does not demonstrate a legitimate insurable interest?
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What are the provisions that supplement basic life insurance coverage called?
What are the provisions that supplement basic life insurance coverage called?
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Which statement about insurance premiums is false?
Which statement about insurance premiums is false?
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When is a non-forfeiture option typically selected by a policyowner?
When is a non-forfeiture option typically selected by a policyowner?
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If the interest on a policy loan is not paid at the policy anniversary, what could the insurance company do?
If the interest on a policy loan is not paid at the policy anniversary, what could the insurance company do?
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What does an incontestability clause prevent an insurer from doing after a specified period?
What does an incontestability clause prevent an insurer from doing after a specified period?
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Which of the following statements is true for both endowment and term life policies?
Which of the following statements is true for both endowment and term life policies?
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Which option is not a function of an application for life insurance policy?
Which option is not a function of an application for life insurance policy?
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What must a father do to transfer his life insurance policy to his son while protecting from estate tax?
What must a father do to transfer his life insurance policy to his son while protecting from estate tax?
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What can an insured do if an irrevocable beneficiary has been designated?
What can an insured do if an irrevocable beneficiary has been designated?
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Which of the following represents basis settlement options for life insurance?
Which of the following represents basis settlement options for life insurance?
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Under what circumstance can an insurance company rescind a life insurance policy?
Under what circumstance can an insurance company rescind a life insurance policy?
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Which statement describes a characteristic of term life insurance?
Which statement describes a characteristic of term life insurance?
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What is usually not included in life insurance applications?
What is usually not included in life insurance applications?
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Study Notes
Life Insurance Policies
- Endowment and Term Life policies provide limited coverage for a specified period.
- Term Life policies do not accumulate cash value.
- Endowment policies pay a benefit to the policy owner if they are alive at the end of the coverage period.
Applications for Life Insurance
- The application is used to gather information for underwriting the insurance policy.
- Applications provide information on the applicant's insurability, including health history, occupation, and lifestyle.
- Applications do not give details pertaining to non-forfeiture options.
Beneficiaries and Policy Ownership
- Irrevocable Beneficiaries have rights to the policy proceeds and cannot be changed without their consent.
- Absolute Assignee has full ownership of the policy and can control all aspects of it.
- Revocable Beneficiary can be changed by the policy owner at any time.
Settlement Options
- Settlement Options outline how the death benefits will be paid out to the beneficiary.
- Common settlement options include:
- Fixed Amount: Lump sum payment.
- Fixed Period: Payments over a specified period.
- Life Income: Payments for the life of the beneficiary.
- Interest on Deposit: Proceeds held by the company and interest paid to the beneficiary.
Insurance Company Rights
- Insurance companies can rescind (cancel) a policy if there are material misrepresentations or fraud in the application.
- This applies even if the policy has been in force for less than two years.
Insurance Agents
- Licensing insurance agents helps to:
- Establish professional standards.
- Protect the public.
- Provide additional government revenue.
Policy Changes
- Policy owners can typically change to a plan with lower premiums, provided they provide evidence of insurability.
Universal Life
- Universal Life policies allow policyholders to adjust premiums, death benefits, and cash values based on investment performance.
Disability Waiver of Premium Rider
- The Disability Waiver of Premium Rider covers your premium payments if you become disabled before a specified age.
Paid-up Additions
- Paid-up Additions increase the death benefit without increasing premiums.
- They do not impact the cash value or loan value of the policy.
Increasing Coverage
- The coverage of a permanent life insurance policy can be increased by adding a supplement term rider.
Laws of Probability
- Insurance companies use laws of probability to:
- Determine premiums.
- Set reserves.
Medical Evidence
- The amount of medical evidence required depends on:
- Age of the applicant.
- Amount of insurance sought.
- Occupation of the applicant.
Conservation of Life Insurance
- Conservation of Life Insurance is the process of retaining policyholders and reducing policy lapses.
- This can be influenced by:
- Agent's service-oriented attitude.
- Effective needs selling.
Sources of Insurance Information
- Insurance companies obtain information about applicants from:
- Medical examination reports.
- Agent's inspection reports.
Misstatements and Fraud
- If an applicant misrepresents material facts or commits fraud, the policy may be void.
Settlement Options Provision
- The Settlement Options Provision describes how the death benefit can be paid to the beneficiary.
- It does not typically include paying the proceeds for the life of the insured.
Non-Forfeiture Provisions
- Non-Forfeiture Provisions guarantee that the policy owner will retain some value even if premium payments are discontinued.
- This does not guarantee that the face amount of the policy will remain the same if the insured's health deteriorates.
Premium Payment Options
- Continuous-premium, full life policies have premiums spread out over the policy's duration.
- This can provide more insurance protection for the same annual premium outlay compared to limited payment life policies.
Interpleader Actions
- Insurance companies can initiate interpleader actions when there are conflicting claims on the same insurance proceeds.
Cash Values
- Cash values in permanent life insurance policies are guaranteed by the company.
- Endowment policies have cash values that build up faster than limited pay life policies of the same duration.
- Yearly renewable term policies have a short duration and their cash values build up slowly.
Insurable Interest
- Insurable interest is a legal requirement for life insurance.
- An individual can have insurable interest in their own life, their spouse's life, or a business partner's life.
- An individual does not have insurable interest in the life of their mistress.
Riders
- Riders are supplemental provisions that can be added to a life insurance policy for an extra premium.
- They may provide coverage for things like accidental death or disability.
Premium Payments
- Premiums are the legal consideration needed for a life insurance policy.
- Payments made more frequently (quarterly, semi-annually) will typically be higher than annual payments.
Non-forfeiture Options
- Policyholders choose non-forfeiture options when they discontinue premium payments on life insurance policies.
Policy Loans
- Interest on policy loans is added to the loan balance if not paid at the policy anniversary.
Incontestability Clause
- This clause states that the insurance company cannot contest the validity of a policy after a certain period (usually two years) unless there was fraud.
Other Key Points
- A participating whole life policy is a type of life insurance policy that offers dividends and participation in the company's profits.
- A participating endowment policy pays the full amount after a specified time.
- In group insurance, the assumption is that all members of the group are insurable.
- The largest amount of information requested in most life insurance applications is data relating to the applicant's insurability.
- A policy is not rendered void by reason of misstatement of the insured's death.
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Description
This quiz covers essential aspects of life insurance policies, including Endowment and Term Life policies, their applications, and the concept of beneficiaries. Test your understanding of how these elements interact in the insurance framework, and learn about different settlement options associated with life insurance.
