Life Insurance Quiz

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Questions and Answers

What safeguards the insurer from an applicant who is contemplating suicide?

suicide exclusion

The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called a(n)

insuring agreement

What provision in a life insurance policy states that the application is considered part of the contract?

entire contract provision

What does the incontestable clause allow an insurer to do?

contest a claim during the contestable period Signup and view all the answers

Which of the following statements is CORRECT about accelerated death benefits?

Must have a terminal illness to qualify Signup and view all the answers

Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered.

True Signup and view all the answers

Which provision guarantees that premiums will be waived if a Juvenile Life policyowner becomes disabled?

payor clause Signup and view all the answers

Which of the following is NOT considered a right given to a policyowner?

Modify a provision in the insurance contract Signup and view all the answers

What provision allows J to reestablish coverage after letting her life insurance policy lapse?

reinstatement provision Signup and view all the answers

If T commits suicide after taking out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider, how much will the insurer pay?

50,000 Signup and view all the answers

What action can a policyowner take if an application for a bank loan requires collateral?

assign policy ownership to the bank Signup and view all the answers

What kind of life insurance beneficiary requires his/her consent when a change of beneficiary is made?

Irrevocable Signup and view all the answers

Under the Common Disaster clause, if K and her husband are both killed in an automobile accident, where would the death proceeds be directed?

daughter Signup and view all the answers

What type of beneficiary is M's son if he has the right to change the beneficiary designation at any time?

Revocable Signup and view all the answers

How much of the death benefit will the mother receive after T and S's situation?

$0 Signup and view all the answers

Under the Common Disaster provision, proceeds will be paid to K's estate if P dies within a specified time. Which statement is true?

Proceeds will be paid to K's estate. Signup and view all the answers

Which type of designation allows a policyowner to change the beneficiary on a life insurance policy permanently?

Irrevocable Signup and view all the answers

Which statement is true regarding a minor beneficiary?

A guardian must be appointed. Signup and view all the answers

What is the underlying concept regarding level premiums?

The early years are charged more than what is needed. Signup and view all the answers

What factor would affect C's decision to convert her convertible term life policy to whole life insurance?

The cost Signup and view all the answers

What does a level premium indicate?

The premium is fixed for the entire duration of the contract. Signup and view all the answers

Where are the death proceeds directed under the Uniform Simultaneous Death Act if the insured and primary beneficiary are both killed in the same accident?

Insured's contingent beneficiary Signup and view all the answers

Through which policy feature can a policyowner choose the frequency of premium payments?

Premium mode Signup and view all the answers

Who is qualified to change the beneficiary designation on a life insurance policy?

Policy owner Signup and view all the answers

Under which provision can a policyowner pay premiums more than once a year?

Mode of premium Signup and view all the answers

Which statement is correct regarding J's choice of monthly premium payment mode?

The gross premium is higher on a monthly payment mode as compared to being paid annually. Signup and view all the answers

An incomplete life insurance application submitted to an insurer will result in what action?

Writing agent Signup and view all the answers

At what time must a policyowner have insurable interest on the insured for the life policy to be valid?

Time of application Signup and view all the answers

What can consumer reports requested by underwriters during the application process determine?

Probability of making timely premium payments Signup and view all the answers

What accurately defines an underwriter's assessment of information on a life insurance application?

Risk classification Signup and view all the answers

Any changes made on an insurance application require the initials of whom?

Applicant Signup and view all the answers

Which Federal law allows an insurer to obtain an inspection report on a potential insured?

Fair Credit Reporting Act Signup and view all the answers

All of these are considered sources of underwriting information about an applicant EXCEPT for what?

Rating Services Signup and view all the answers

What action should P take regarding the unanswered questions on a life application?

Set up a meeting with the applicant to answer the remaining questions Signup and view all the answers

When does a life insurance contract become effective if the initial premium is not collected during the application process?

After application has been approved by the underwriters Signup and view all the answers

What will happen to Q's policy if it was returned within the free-look period?

Premium will be fully refunded Signup and view all the answers

Why is an applicant's signature required on a life insurance application?

To attest that the statements on the application are accurate Signup and view all the answers

What is required when an insurance application is taken by a producer?

Applicant's initials Signup and view all the answers

What must occur before M's policy goes into effect?

Free-look period has expired Signup and view all the answers

Which factors do NOT play a role in the underwriting of a life insurance policy?

Marital status Signup and view all the answers

Which statement is INCORRECT regarding the federal income tax treatment of life insurance?

Entire cash surrender value is taxable Signup and view all the answers

What action is taken when a policyowner uses a life insurance policy as collateral for a bank loan?

Collateral assignment Signup and view all the answers

What will happen if N does not make the required premium payment due on August 1?

Claim will be denied Signup and view all the answers

What does the insuring agreement in a life insurance contract establish?

An insurer's basic promise Signup and view all the answers

What option provides an additional death benefit for a limited time at the lowest possible cost?

Accidental Death and Dismemberment rider (AD&D) Signup and view all the answers

What type of policy should Q purchase if he wants both permanent protection on his wife and Term coverage on himself?

Whole life policy with other insured rider Signup and view all the answers

An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to whom?

Applicant's physician Signup and view all the answers

What should the producer collect from D along with the signed health statement?

Initial premium Signup and view all the answers

What is being delivered during a policy delivery?

Insurance contract to the proposed insured Signup and view all the answers

What is the purpose of the U.S. Patriot Act?

Detect and deter terrorism Signup and view all the answers

What should a producer inform the insurer of when submitting an insurance application?

Relevant information not included on the application Signup and view all the answers

What component is required before a life insurance policy is issued?

Applicant's signature on application Signup and view all the answers

From what authority derives the requirement for an investigative consumer report disclosure?

Fair Credit Reporting Act Signup and view all the answers

What type of group plan involves employees sharing the cost?

Contributory plan Signup and view all the answers

What is an important underwriting principle of group life insurance?

Everyone must be covered in the group Signup and view all the answers

What is true about a group term life conversion when an employee is terminated?

Policy proceeds will be paid if the employee dies during the conversion period Signup and view all the answers

What characterizes a noncontributory group term life plan?

The entire cost of the plan is paid for by the employer Signup and view all the answers

Under a trustee group life policy, who is eligible for a certificate of coverage?

Employee Signup and view all the answers

What does a person insured within a group contract receive?

Certificate Signup and view all the answers

Group life insurance policies are generally written as what?

Annually renewable term Signup and view all the answers

What type of policy can an employee with $25,000 group term life coverage convert to after being fired?

$25,000 individual whole life policy Signup and view all the answers

What type of policy should P purchase if he wants to ensure a monthly income to beneficiaries after his death?

Family Maintenance policy Signup and view all the answers

Which provision is NOT a requirement in a group life policy?

Accidental Signup and view all the answers

What group term life feature allows an individual to continue coverage after leaving the group?

Conversion Signup and view all the answers

What type of group life insurance plan does a corporation have if employees share in the cost?

Contributory Signup and view all the answers

What type of annuity did N purchase if it pays $2,000/month starting at age 70?

Fixed Deferred Signup and view all the answers

What type of annuity would be best for S to receive immediate income for life?

Single Premium Signup and view all the answers

All of these would be acceptable annuity choices for W EXCEPT for what?

Immediate Annuity Signup and view all the answers

What type of annuity has a cash value based on the performance of investment funds?

Variable Signup and view all the answers

What type of annuity guarantees payments for life while also paying remaining payments to heirs if the annuitant dies early?

Life Annuity with Period Certain Signup and view all the answers

What is an element of a Single Premium annuity?

Lump sum payment Signup and view all the answers

What is a characteristic of an Individual Straight Life annuity?

Payments are made to an annuitant for life Signup and view all the answers

How long must one be disabled to be eligible for Social Security disability benefits?

5 Signup and view all the answers

What is Old Age and Survivors Health Insurance (OASDHI) also known as?

Social Security Signup and view all the answers

Which is not a benefit under Social Security?

Unemployment Signup and view all the answers

To be eligible for Social Security disability benefits, an employee must be unable to perform what?

Any occupation Signup and view all the answers

What determines the full amount of Social Security retirement benefits a qualified individual is entitled to receive?

Primary Insurance Amount (PIA) Signup and view all the answers

Which retirement plan can be started by an employee even if another plan exists?

Individual Retirement Account (IRA) Signup and view all the answers

Which is NOT a type of agent authority?

Principal Signup and view all the answers

What does the Consideration clause of an insurance contract include?

The schedule and amount of premium payments Signup and view all the answers

Where will the proceeds from E's life insurance policy be directed to after his death if he had named F as the beneficiary?

F Signup and view all the answers

What type of contract liquidates an estate through recurrent payments?

Annuity Signup and view all the answers

What can an employee with group life contract do after retiring at age 59 1/2?

Convert to an individual permanent policy at an individual rate Signup and view all the answers

What does the underwriting process involve?

All of these EXCEPT for Policy Loan Signup and view all the answers

Which do NOT constitute policy delivery?

Policy issued with a rating Signup and view all the answers

Which parts of a life insurance policy are guaranteed to be true?

Warranty Signup and view all the answers

Who will the Accidental Death benefits be paid to if Q and R are killed instantly in a car accident?

P only Signup and view all the answers

What product would best serve a retired individual looking to invest a lump-sum of money through an insurance company?

Annuity Signup and view all the answers

At what age can an IRA owner start making withdrawals without a tax penalty?

59 1/2 Signup and view all the answers

Where would the death proceeds be directed if a Key Employee policy is taken out on a vice president who later dies working for a different company?

Company X Signup and view all the answers

What is true regarding third-party ownership of a life insurance policy?

It is used extensively in estate planning and business circumstances Signup and view all the answers

What does a Cross Purchase Buy-Sell Agreement require among partners?

Each partner must own a policy on the other partners Signup and view all the answers

What is NOT true about a Key Employee Life policy?

The beneficiary is named by the key employee Signup and view all the answers

Who elects the governing body of a mutual insurance company?

Policy Holders Signup and view all the answers

Which factors determine how much coverage can be purchased with dividends for paid-up additions?

All of these EXCEPT beneficiary's age Signup and view all the answers

Which provisions require proof of insurability after a policy has lapsed?

Reinstatement Signup and view all the answers

What will happen to the policy proceeds if M had an outstanding policy loan at the time of his death?

Policy Proceeds will have the loan balance deducted Signup and view all the answers

What does the Consideration clause in a life insurance policy indicate?

A policyowner's consideration consists of a completed application and the initial premium Signup and view all the answers

What is the purpose of the Suicide provision in life insurance?

Signup and view all the answers

Study Notes

Life Insurance Beneficiaries

An irrevocable beneficiary requires consent for any changes made to the beneficiary designation.
If K and her husband both die in a common disaster, the death proceeds from her life insurance will go to her daughter as the contingent beneficiary.
A revocable beneficiary, such as M's son, can be changed by the policyholder at any time.

Life Insurance Policy Provisions

The Common Disaster provision states that if the insured dies before the primary beneficiary, the proceeds go to the insured's estate.
A premium mode allows policy owners to choose how frequently to make premium payments.
Insurers may require a guardian to be appointed in the beneficiary clause when naming a minor as a beneficiary.

Underwriting and Policy Application

Insurable interest must exist at the time of application for a life insurance policy to be valid.
Consumer reports are used by underwriters to assess the likelihood of timely premium payments.
The Fair Credit Reporting Act allows insurers to obtain inspection reports on potential insureds.
If an application is incomplete, it may be returned to the writing agent for completion.

Life Insurance Contract Facts

Life insurance contracts become effective only after approval by underwriters.
If an individual returns the policy within the free-look period, the premium will be fully refunded.
In situations where both insured and beneficiary die simultaneously, proceeds go to the contingent beneficiary under the Uniform Simultaneous Death Act.

Group Life Insurance

A noncontributory group term life plan is entirely funded by the employer, while a contributory plan requires employees to share costs.
Upon termination, employees can convert their group term life insurance to an individual policy.

Annuities and Retirement Benefits

A fixed deferred annuity provides guaranteed income starting at a later age, while a single premium annuity requires one lump sum payment.
Individuals can start making penalty-free withdrawals from an IRA at age 59½.

Insurance Policy Rights and Provisions

The insuring agreement specifies the insurer's basic promise regarding benefit payouts upon death.
The Payor Clause waives premiums if a guardian of a juvenile life policy becomes disabled.
The incontestable clause restricts an insurer's ability to contest a claim after a specific period post-issue.

Special Provisions

The Suicide provision protects insurers from claims made shortly after policy issuance when the insured may be contemplating suicide.
An applicant's signature ensures their statements on the application are accurate to the best of their knowledge.

Miscellaneous

Under the Entire Contract provision, the application is considered part of the insurance contract.
The Misstatement of Age provision adjusts coverage based on the insured's true age if misstatements are found.
If a policyowner needs to obtain a bank loan requiring collateral, they can perform a collateral assignment.

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Description

Test your knowledge on life insurance terms and beneficiary designations with this quiz. Understand key concepts such as irrevocable beneficiaries and the Common Disaster clause. Perfect for students and professionals alike.