New York Life Insurance 2
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- 1.
A group of 15 skydivers met at a seminar and began talking about life insurance during a break. Because it was expensive to get individual life insurance, they decided to band together to form a small group so that they could qualify for group life insurance. After they applied for group life insurance, they were rejected. Why?p
- A.
The group has not been established for long enough.
- B.
The purpose of the group was to purchase life insurance
- C.
Their profession poses too high of a risk for the insurer.
Correct Answer
B. The purpose of the group was to purchase life insuranceExplanation
The reason they were rejected for group life insurance could be that the insurance company does not offer group life insurance to individuals who specifically form a group solely for the purpose of purchasing life insurance. The insurance company may have policies in place that require groups to have a common bond or purpose other than just buying insurance.Rate this question:
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- 2.
The Superintendent may refuse to issue a license in all of the following situations EXCEPT
- A.
The proposed licensee is not trustworthy
- B.
The proposed licensee is not competent.
- C.
The proposed licensee is from another state
Correct Answer
C. The proposed licensee is from another stateExplanation
The Superintendent may refuse to issue a license in all of the situations mentioned except when the proposed licensee is from another state. This means that if the proposed licensee is from another state, the Superintendent cannot refuse to issue a license solely based on that reason. However, if the proposed licensee is not trustworthy or not competent, the Superintendent has the authority to refuse to issue a license.Rate this question:
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- 3.
Which of the following will be included in a policy summary?
- A.
Comparisons with similar policies
- B.
Primary and secondary beneficiary designations
- C.
Premium amounts and surrender values
Correct Answer
C. Premium amounts and surrender valuesExplanation
A policy summary is a document that provides an overview of an insurance policy. It typically includes important information such as premium amounts and surrender values. Premium amounts refer to the amount of money that the policyholder needs to pay for the insurance coverage, while surrender values indicate the amount of money that the policyholder will receive if they decide to terminate or surrender the policy before its maturity. These details are crucial for individuals to understand the financial aspects of the policy and make informed decisions regarding their insurance coverage.Rate this question:
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- 4.
What are the two components of a universal policy?
- A.
Insurance and cash account
- B.
Separate account and policy loans
- C.
Insurance and death benefit
Correct Answer
A. Insurance and cash accountExplanation
A universal policy consists of two main components: insurance and a cash account. The insurance component provides coverage and protection against risks, such as death or disability. The cash account component allows the policyholder to accumulate savings over time, as a portion of the premium payments are invested. This cash account can be accessed by the policyholder for various purposes, such as borrowing against it or withdrawing funds. Therefore, both insurance and a cash account are essential elements of a universal policy.Rate this question:
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- 5.
Why is an equity indexed annuity considered to be a fixed annuity?
- A.
It is not tied to an index like the S&P 500
- B.
It has a guaranteed minimum interest rate
- C.
It has modest investment potential
Correct Answer
B. It has a guaranteed minimum interest rateExplanation
An equity indexed annuity is considered to be a fixed annuity because it offers a guaranteed minimum interest rate. Unlike variable annuities, which are tied to an index like the S&P 500 and offer higher potential returns, equity indexed annuities provide a more conservative investment option with a guaranteed minimum return. This makes them more similar to traditional fixed annuities, which also offer a guaranteed interest rate. While equity indexed annuities may have some investment potential, it is generally considered to be more modest compared to variable annuities.Rate this question:
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- 6.
Before he died, an annuitant had received $12,500 in monthly benefits from his $25,000 straight life annuity. He was also the insured under a $50,000 paid-up whole life policy that named his wife as primary beneficiary. Considering both contracts, how much will the annuitant's spouse receive in benefits?
- A.
$50,000
- B.
Nothing
- C.
$62,500
Correct Answer
A. $50,000Explanation
The annuitant's spouse will receive $50,000 in benefits. This is because the annuitant had received $12,500 in monthly benefits from the straight life annuity, but this annuity does not have a death benefit. However, the annuitant also had a $50,000 paid-up whole life policy with his wife as the primary beneficiary. Therefore, the spouse will receive the death benefit of $50,000 from the whole life policy.Rate this question:
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- 7.
A deferred annuity is surrendered prior to annuitization. Which of the following best describes the nonforfeiture value of the annuity?
- A.
The surrender value should be equal to 100% of the premium paid, minus any prior withdrawals and surrender charges.
- B.
A deferred annuity cannot be surrendered prior to annuitization. The owner must wait until the annuitization period begins to receive any payments.
- C.
The surrender value will not be more than 80% of the cash value in the annuity at the time of surrender.
Correct Answer
A. The surrender value should be equal to 100% of the premium paid, minus any prior withdrawals and surrender charges.Explanation
The correct answer explains that the surrender value of a deferred annuity, if surrendered prior to annuitization, is equal to 100% of the premium paid, minus any prior withdrawals and surrender charges. This means that the annuity holder will receive back the full amount of the premium they paid, but any withdrawals or surrender charges will be deducted from that amount.Rate this question:
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- 8.
Which of the following best describes what the "annuity period" is?
- A.
The period of time spanning from the accumulation period to the annuitization period
- B.
The period of time during which accumulated money is converted into income payments
- C.
The period of time spanning from the effective date of the contract to the date of its termination
Correct Answer
B. The period of time during which accumulated money is converted into income paymentsExplanation
The "annuity period" refers to the period of time during which accumulated money is converted into income payments. This means that after the accumulation period, where money is being saved or invested, the annuity period begins and the accumulated funds are used to generate regular income payments.Rate this question:
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- 9.
Which of the following is NOT a way to determine the interest rate in a Universal Life Policy?
- A.
Maintain a profit margin between the interest credited on in-force policies and the interest earned on their own investment portfolio
- B.
Estimate market conditions for the life of the policy
- C.
Declare the annual rate by the company's board of directors
Correct Answer
B. Estimate market conditions for the life of the policyExplanation
The correct answer is "Estimate market conditions for the life of the policy." This is not a way to determine the interest rate in a Universal Life Policy because the interest rate is not based on market conditions. Instead, the interest rate is determined by maintaining a profit margin between the interest credited on in-force policies and the interest earned on their own investment portfolio, as well as by declaring the annual rate by the company's board of directors.Rate this question:
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- 10.
Which of the following would most directly affect the purchasing power of benefits paid on a fixed annuity?
- A.
Economic inflation
- B.
Interest rates
- C.
Guaranteed minimum payout
Correct Answer
A. Economic inflationExplanation
The purchasing power of benefits paid on a fixed annuity would be most directly affected by inflation.Rate this question:
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- 11.
How long does a licensee have to deliver information requested by the Superintendent of Insurance?
- A.
30 days
- B.
15 days
- C.
10 days
Correct Answer
B. 15 daysExplanation
A licensee has 15 days to deliver the information requested by the Superintendent of Insurance. This time frame allows the licensee sufficient time to gather and compile the necessary information and documents. It also ensures that the Superintendent of Insurance receives the requested information in a timely manner, allowing them to carry out their duties effectively.Rate this question:
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- 12.
All of the following statements are true concerning the taxation of a traditional IRA EXCEPT
- A.
Early distributions are always subject to penalty.
- B.
The 10% penalty is waived for withdrawals made after age 59 1/2.
- C.
A premature distribution may be subject to a 10% penalty, and the amount withdrawn is taxed as ordinary income in the year withdrawn.
Correct Answer
A. Early distributions are always subject to penalty.Explanation
The given statement "Early distributions are always subject to penalty" is incorrect. Early distributions from a traditional IRA are indeed subject to a penalty, but there are certain exceptions where the penalty can be waived. One such exception is withdrawals made after the age of 59 1/2, where the 10% penalty is waived. Additionally, a premature distribution may be subject to a 10% penalty, and the amount withdrawn is taxed as ordinary income in the year withdrawn. Therefore, the correct answer is that early distributions are not always subject to a penalty.Rate this question:
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- 13.
Which is true about a spouse term rider?
- A.
The rider is decreasing term insurance.
- B.
Coverage is allowed for an unlimited time.
- C.
The rider is level term insurance.
Correct Answer
C. The rider is level term insurance.Explanation
A spouse term rider is a type of insurance policy that provides coverage for the spouse of the main policyholder. In this case, the correct answer is that the rider is level term insurance. This means that the coverage amount remains the same throughout the duration of the policy. Unlike decreasing term insurance, where the coverage amount decreases over time, and unlimited time coverage, which is not mentioned as an option, a level term insurance rider provides a consistent level of coverage for the spouse.Rate this question:
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- 14.
What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military?
- A.
Military service or war
- B.
Hazardous occupation
- C.
Limited
Correct Answer
A. Military service or warExplanation
The correct answer is "Military service or war." This refers to a clause in an insurance policy that restricts or eliminates the death benefit if the insured person dies due to war or while serving in the military. This clause is included to mitigate the risks associated with these specific circumstances, as they are considered high-risk situations.Rate this question:
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- 15.
Are insurance company underwriters allowed to discriminate?
- A.
No, higher risks pay higher premium
- B.
Yes, but not unfairly
- C.
No, discrimination is an unfair practice
Correct Answer
B. Yes, but not unfairlyExplanation
Insurance company underwriters are allowed to discriminate, but it must be done in a fair and non-discriminatory manner. Underwriters assess risks based on various factors such as age, health condition, occupation, and lifestyle. This allows them to determine the appropriate premium for each individual based on their level of risk. However, it is important for underwriters to avoid unfair discrimination based on factors such as race, gender, or religion, as this would be considered discriminatory and unethical.Rate this question:
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- 16.
An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy’s cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have?
- A.
Term life
- B.
Universal life
- C.
Controlled
Correct Answer
B. Universal lifeExplanation
The insured most likely has a universal life insurance policy. Universal life insurance policies have a cash value component that allows the insured to withdraw funds from the policy to pay for various expenses, such as medical bills. However, there is usually a limit on the amount that can be withdrawn and a fee charged by the insurer for the withdrawal. This aligns with the scenario described in the question.Rate this question:
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- 17.
In order to be a licensed life settlement broker, a person must complete which of the following requirements?
- A.
Have been a licensed life producer for at least one year
- B.
Submit fingerprints
- C.
Submit to a drug test
Correct Answer
B. Submit fingerprintsExplanation
To become a licensed life settlement broker, one must submit their fingerprints. This requirement is likely in place to ensure that the individual's identity and background can be verified, ensuring that they are qualified and trustworthy to engage in the business of life settlements. By submitting fingerprints, authorities can conduct a thorough background check, including criminal records, to ensure the safety and protection of consumers in the life settlement industry.Rate this question:
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- 18.
Which of the following statements is an accurate comparison between private and government insurers?
- A.
Private insurers may be authorized to transact insurance by state insurance departments.
- B.
Insurance provided by the government is called "federal insurance."
Correct Answer
A. Private insurers may be authorized to transact insurance by state insurance departments.Explanation
Private insurers may be authorized to transact insurance by state insurance departments, whereas insurance provided by the government is not necessarily called "federal insurance." This statement highlights the key difference between private and government insurers in terms of their authorization and regulation. While private insurers need to obtain authorization from state insurance departments, government insurers may operate under different names and may not necessarily be referred to as "federal insurance."Rate this question:
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- 19.
All of the following statements are components of a Credit Life program EXCEPT
- A.
Benefits are paid to the borrower's beneficiary.
- B.
Benefits are paid directly to the creditor.
- C.
The amount of insurance permissible is limited per borrower.
Correct Answer
A. Benefits are paid to the borrower's beneficiary.Explanation
Credit Life insurance is designed to cover the balance of a loan in the event of the borrower's death, with benefits typically paid directly to the creditor, not the borrower's beneficiary. This ensures the loan is paid off, protecting both the creditor and the borrower's estate from liability.Rate this question:
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- 20.
Which of the following is an example of apparent authority?
- A.
The agent puts up a sign with the logo of the insurance company without express permission.
- B.
The agent accepts a premium payment after the end of the grace period
- C.
The agent accepts a premium payment during the grace period.
Correct Answer
B. The agent accepts a premium payment after the end of the grace periodExplanation
Apparent authority refers to a situation where a person is perceived to have the authority to act on behalf of another, even if they do not actually have that authority. In this case, the agent accepting a premium payment after the end of the grace period gives the appearance that they have the authority to accept payments outside of the designated timeframe. This creates the perception that the agent has the authority to act on behalf of the insurance company in this matter, even though they may not actually have that authority.Rate this question:
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- 21.
The New York Superintendent has the responsibility to make sure each entity transacting insurance in this state remains solvent. Insurers are required to file a statement with the Superintendent
- A.
Annually on or before March 1st.
- B.
Biannually on or before April 1st.
- C.
Every 2 years by the renewal date.
Correct Answer
C. Every 2 years by the renewal date.Explanation
Insurers are required to file a statement with the New York Superintendent every 2 years by the renewal date. This means that insurers must provide a statement of their financial status and solvency to the Superintendent once every two years, coinciding with their renewal date. This ensures that the Superintendent can monitor the financial health of insurance entities operating in the state and take appropriate action if any insurer is at risk of becoming insolvent.Rate this question:
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- 22.
An insurance broker's license may be issued to
- A.
Anyone who can pass the written examination.
- B.
A person, firm or corporation.
- C.
Persons age 17 or older.
Correct Answer
B. A person, firm or corporation.Explanation
An insurance broker's license may be issued to a person, firm, or corporation. This means that not only individuals, but also businesses and organizations can obtain an insurance broker's license. This allows for a wider range of entities to engage in insurance brokerage activities, providing more options and flexibility in the industry.Rate this question:
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- 23.
An insured purchases a policy in 2000 and dies in 2005. The insurance company discovers at that time that the insured concealed information during the application process. What can they do?
- A.
Pay the death benefit
- B.
Sue for the right to not pay the death benefit
- C.
Pay a decreased death benefit
Correct Answer
C. Pay a decreased death benefitExplanation
If an insured purchases a policy in 2000 and dies in 2005, but the insurance company discovers that the insured concealed information during the application process, they can choose to pay a decreased death benefit. This means that instead of paying the full death benefit amount, the insurance company will reduce the payout to a lower amount due to the insured's concealment of information. This is a possible action that the insurance company can take in such a situation.Rate this question:
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- 24.
Which of the following is true regarding the insurance amount in a credit life policy?
- A.
Creditor may insure the debtor for an unlimited amount of coverage.
- B.
Allowable amount of coverage is determined by the State Insurance Commissioner.
- C.
Creditor can only insure the debtor for the amount owed.
Correct Answer
C. Creditor can only insure the debtor for the amount owed.Explanation
The correct answer is "Creditor can only insure the debtor for the amount owed." This means that in a credit life policy, the creditor is only allowed to insure the debtor for the specific amount of debt that is owed. The insurance coverage cannot exceed the amount of the debt.Rate this question:
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- 25.
Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy?
- A.
The Consideration Clause
- B.
Ownership rights
- C.
The Entire Contract Provision
Correct Answer
B. Ownership rightsExplanation
Ownership rights explain the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy. As the owner of the policy, they have the authority to make these decisions and have control over the policy. The ownership rights allow the policyowner to modify the policy as needed, such as changing beneficiaries or selecting different options, and also receive the benefits or proceeds of the policy when the time comes.Rate this question:
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- 26.
An insured modifies his insurance claims, illegally adjusting them to display a lower amount. What insurance concept does this violate?
- A.
Competent parties
- B.
Reasonable expectations
- C.
Utmost good faith
Correct Answer
C. Utmost good faithExplanation
When an insured modifies their insurance claims to display a lower amount, they are not acting in utmost good faith. Utmost good faith is a principle in insurance that requires both the insured and the insurer to disclose all relevant information honestly and accurately. By illegally adjusting the claims to display a lower amount, the insured is not being honest and is violating this principle.Rate this question:
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- 27.
Based on Human Life Value Approach, which of the following is NOT used to calculate an individual’s life value?
- A.
Predicted needs of the family after the insured's death.
- B.
Insured's current and future income.
- C.
Insured's annual expenses.
Correct Answer
A. Predicted needs of the family after the insured's death.Explanation
The predicted needs of the family after the insured's death are not used to calculate an individual's life value according to the Human Life Value Approach. This approach focuses on factors such as the insured's current and future income and their annual expenses to determine their life value. The predicted needs of the family after the insured's death may be considered in other calculations such as determining the amount of life insurance coverage needed, but it is not directly used in calculating the individual's life value.Rate this question:
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- 28.
Which of the following is true about a defined benefit plan?
- A.
Contributions are made in regular fixed amounts.
- B.
High-salaried employees with only a few years until retirement receive the highest contribution.
- C.
Low-salaried employees are excluded from the plan.
Correct Answer
B. High-salaried employees with only a few years until retirement receive the highest contribution.Explanation
In a defined benefit plan, the amount of retirement benefit is predetermined based on factors such as salary and years of service. Therefore, high-salaried employees who are close to retirement would receive the highest contribution because they have contributed more to the plan over their career and have less time to accumulate retirement benefits compared to low-salaried employees. This ensures that employees who have earned higher salaries and are closer to retirement receive a higher level of financial support in their retirement years.Rate this question:
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- 29.
Which of the following will be included in a policy summary?
- A.
Comparisons with similar policies
- B.
Primary and secondary beneficiary designations
- C.
Premium amounts and surrender values
Correct Answer
C. Premium amounts and surrender valuesExplanation
A policy summary typically includes important information about an insurance policy, such as premium amounts and surrender values. Premium amounts refer to the amount of money that the policyholder needs to pay regularly to keep the policy in force. Surrender values, on the other hand, represent the amount of money that the policyholder will receive if they decide to surrender or cancel the policy before its maturity date. Including these details in a policy summary helps individuals understand the financial aspects of the policy and make informed decisions.Rate this question:
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- 30.
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following terms best describes what the insurer has violated?
- A.
Representation
- B.
Adhesion
- C.
Consideration
Correct Answer
C. ConsiderationExplanation
Consideration is the term that best describes what the insurer has violated in this scenario. Consideration refers to the exchange of something of value between the parties involved in a contract. In an insurance policy, the insured pays premiums as consideration, while the insurer promises to provide coverage and pay legitimate claims. By neglecting to pay a legitimate claim that is covered under the terms of the policy, the insurer is failing to fulfill their part of the consideration and violating the contract.Rate this question:
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- 31.
In forming an insurance contract, when does an acceptance usually occur?
- A.
At the time of the second premium
- B.
At the time of the application
- C.
When the insurer approves a prepaid application
- D.
At policy delivery
Correct Answer
C. When the insurer approves a prepaid applicationExplanation
In an insurance contract, acceptance typically occurs when the insurer approves a prepaid application. This means that once the insurer reviews and approves the application, the contract is considered accepted. The payment of the premium in advance indicates the intent of the applicant to enter into the contract, and the insurer's approval finalizes the acceptance. Policy delivery may occur after acceptance, but it is not the determining factor for when acceptance takes place.Rate this question:
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- 32.
What are the most common penalties for violations of insurance statutes?
- A.
A cease and desist order
- B.
A fine
- C.
License suspension
- D.
Revocation
- E.
Jailed
Correct Answer(s)
A. A cease and desist order
B. A fine
C. License suspension
D. RevocationExplanation
The most common penalties for violations of insurance statutes include a cease and desist order, a fine, license suspension, and revocation. A cease and desist order is issued by a regulatory authority to stop any illegal activities, while a fine is a monetary penalty imposed on the violator. License suspension means that the violator's insurance license is temporarily revoked, and revocation is the permanent cancellation of the license. These penalties aim to enforce compliance with insurance regulations and ensure the protection of consumers.Rate this question:
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- 33.
What are the strategies used by underwriters to prevent adverse selection?
- A.
Restriction of coverage
- B.
Refusal to accept a risk
- C.
Accepting a risk at a higher rate
- D.
Void risky applications
Correct Answer(s)
A. Restriction of coverage
B. Refusal to accept a risk
C. Accepting a risk at a higher rateExplanation
Underwriters use several strategies to prevent adverse selection. One strategy is the restriction of coverage, where they limit the types of risks they are willing to insure. This helps them avoid insuring high-risk individuals or businesses. Another strategy is the refusal to accept a risk, where underwriters decline to provide coverage to individuals or businesses that pose a significant risk. Additionally, underwriters may choose to accept a risk at a higher rate, charging higher premiums to offset the increased risk. These strategies help underwriters mitigate the potential adverse effects of selecting high-risk clients.Rate this question:
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- 34.
What entities make up the Medical Information Bureau?
- A.
Medical professionals
- B.
Insurers
- C.
Federal investigators
- D.
None of the above
Correct Answer
B. InsurersExplanation
The Medical Information Bureau is made up of insurers. This means that the entities involved in the Medical Information Bureau are insurance companies. They are responsible for collecting and sharing medical information about individuals to assess their risk and determine insurance coverage. Medical professionals and federal investigators are not directly involved in the Medical Information Bureau.Rate this question:
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- 35.
If an agent fails to obtain the applicant's signature on the insurance application, what must the insurer do?
- A.
Send the application back to the applicant for signature
- B.
Ask the producer to sign for the applicant
- C.
Deliver the completed part of the policy until the other part is signed
- D.
Void the application
Correct Answer
A. Send the application back to the applicant for signatureExplanation
If an agent fails to obtain the applicant's signature on the insurance application, the insurer must send the application back to the applicant for signature. This is necessary because the applicant's signature is required to validate and authorize the application. Without the applicant's signature, the application is incomplete and cannot proceed further in the insurance process. Therefore, the insurer must return the application to the applicant to ensure that it is properly signed before moving forward.Rate this question:
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- 36.
An applicant conceals relevant health information on the application. The applicant presents what type of hazard?
- A.
Speculative
- B.
Moral
- C.
Pure
- D.
Spiritual
Correct Answer
B. MoralExplanation
The applicant concealing relevant health information on the application presents a moral hazard. This is because the act of intentionally hiding important health information is considered dishonest and unethical. It demonstrates a lack of moral integrity and raises concerns about the applicant's trustworthiness and potential risks they may pose to others.Rate this question:
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- 37.
Insurance is used to transfer what to the insurance company?
- A.
Peril
- B.
Debt
- C.
Financial responsibility for loss
- D.
Premium
Correct Answer
C. Financial responsibility for lossExplanation
Insurance is used to transfer financial responsibility for loss to the insurance company. When individuals or businesses purchase insurance, they are essentially transferring the risk of potential financial losses to the insurance company. In case of an event that causes a loss, the insurance company will bear the financial responsibility for covering the damages or losses incurred by the insured party. This allows the insured party to have peace of mind knowing that they will be protected financially in the event of an unforeseen loss or damage.Rate this question:
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- 38.
What does liquidity mean in a life insurance policy?
- A.
Extra cash after premium
- B.
The ability to buy and sell
- C.
Availability of cash value
- D.
Changing of policy to whole life
Correct Answer
C. Availability of cash valueExplanation
Liquidity in a life insurance policy refers to the availability of cash value. This means that policyholders have the option to access the cash value of their policy if needed, either through withdrawals or loans. This provides flexibility and financial security, as policyholders can use the cash value for various purposes, such as emergencies, education expenses, or retirement planning. It allows policyholders to have a readily accessible source of funds, providing them with liquidity in times of financial need.Rate this question:
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- 39.
What happens to a policy's cash value under an extended term nonforfeiture option?
- A.
The cash value interest rises and taxed by 30%
- B.
The face value is converted to the same face amount as in the whole life
- C.
Nothing happens
- D.
The term policy starts over
Correct Answer
B. The face value is converted to the same face amount as in the whole lifeExplanation
Under an extended term nonforfeiture option, the cash value of a policy is not affected. Instead, the face value of the policy is converted to the same face amount as in the whole life. This means that the policy will continue, but without any cash value accumulation.Rate this question:
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- 40.
What are the dividend options in life insurance policies?
- A.
Cash
- B.
Reduced premium
- C.
Accumulation at interest
- D.
Paid-up additions
- E.
Paid-up option
- F.
One year term
- G.
Acceleration of endowment
- H.
Bi-monthly checks
Correct Answer(s)
A. Cash
B. Reduced premium
C. Accumulation at interest
D. Paid-up additions
E. Paid-up option
F. One year term
G. Acceleration of endowmentExplanation
The dividend options in life insurance policies refer to the different ways in which policyholders can receive their dividends. These options include receiving the dividends in cash, using them to reduce future premium payments, accumulating them with interest, adding them to the policy as paid-up additions, converting them into a paid-up option, using them to purchase a one-year term insurance, or accelerating the endowment of the policy. These options provide flexibility for policyholders to choose how they want to utilize the dividends earned from their life insurance policies.Rate this question:
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- 41.
What life policy rider allows the company to forgo collecting the premium if the insured becomes disabled?
- A.
401k
- B.
Disabled rider
- C.
Waiver of premium
- D.
Post premium option A rider
Correct Answer
C. Waiver of premiumExplanation
The correct answer is "Waiver of premium." This life policy rider allows the company to waive the collection of premium if the insured becomes disabled. This means that the insured does not have to pay the premium during the period of disability, ensuring that the policy remains in force even if the insured is unable to make payments.Rate this question:
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- 42.
Which nonforfeiture option is automatically selected by the company if not chosen by the policyowner?
- A.
Cash value
- B.
Lump-sum
- C.
Reduced paid-up
- D.
Extended term
Correct Answer
D. Extended termExplanation
If the policyowner does not choose a nonforfeiture option, the company will automatically select the extended term nonforfeiture option. This option allows the policy to be extended for a specified period of time without the need for further premium payments. During this extended term, the policy will remain in force, but the death benefit will be reduced. This option provides a way for the policy to continue without the policyowner having to pay additional premiums.Rate this question:
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- 43.
Who does the common disaster clause protect?
- A.
The contingent beneficiary
- B.
The insured
- C.
The primary beneficiary
- D.
The policyowner
Correct Answer
A. The contingent beneficiaryExplanation
The common disaster clause is designed to protect the contingent beneficiary. This clause ensures that if both the insured and the primary beneficiary die simultaneously or within a short period of time, the contingent beneficiary will receive the death benefit. This is important because it prevents the death benefit from being left in limbo or going to the insured's estate. Instead, it provides a clear plan for who will receive the benefit in the event of a common disaster.Rate this question:
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- 44.
An applicant for life insurance misstated her age on the policy application. How will this affect the death benefit?
- A.
The payout will take approximately 2 years after the death of the applicant
- B.
The death benefit will be adjusted to the amount that the insured could obtain for her correct age
- C.
It will immediately reduce the death benefit with a penalty of about 10%
- D.
The death benefit will be paid with out being affected
Correct Answer
B. The death benefit will be adjusted to the amount that the insured could obtain for her correct age -
- 45.
The term 'double indemnity means' that the insurer will pay a benefit of twice the face amount?
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The term "double indemnity" refers to an insurance policy provision where the insurer agrees to pay a benefit that is twice the face amount in certain circumstances. This provision typically applies when the insured's death is caused by a specific event, such as an accident or a violent crime. Therefore, the statement that the insurer will pay a benefit of twice the face amount is true.Rate this question:
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- 46.
Which dividend option is automatically selected by the company if not chosen by the policyowner?
- A.
Lump-sum
- B.
Acceleration of endowment
- C.
Paid-up additions
- D.
Paid-up option
Correct Answer
C. Paid-up additionsExplanation
If the policyowner does not choose a dividend option, the company will automatically select the "Paid-up additions" option. This means that the dividends will be used to purchase additional paid-up insurance coverage, increasing the policy's death benefit and cash value. This option allows the policy to grow over time without requiring any additional premium payments from the policyowner.Rate this question:
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- 47.
Settlement options is the term used to describe methods of payment of the death benefit to the beneficiary upon the insured's death.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The explanation for the given correct answer is that settlement options refer to the various ways in which the death benefit is paid to the beneficiary after the insured person passes away. These options may include lump sum payments, annuities, or installments over a period of time. Therefore, it is true that settlement options are the methods of payment for the death benefit.Rate this question:
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- 48.
Which nonforfeiture option provides coverage for the longest period of time?
- A.
Waiver of premium
- B.
Settlement option
- C.
Extended term
- D.
Reducer paid-up
Correct Answer
D. Reducer paid-upExplanation
The reducer paid-up nonforfeiture option provides coverage for the longest period of time. This option allows the policyholder to reduce the death benefit and use the cash value of the policy to purchase a paid-up policy with a smaller face amount. This paid-up policy will provide coverage for the rest of the insured's life, ensuring that the policy remains in force for the longest possible duration.Rate this question:
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- 49.
The disadvantage of selecting the life income settlement option is if the beneficiary dies shortly after the payments begin, the balance of the principal will be forfeited.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The statement is true because if the beneficiary dies shortly after the payments begin, the remaining balance of the principal will be forfeited. This means that the beneficiary's estate or any other designated individuals will not receive any remaining funds. Therefore, selecting the life income settlement option can be disadvantageous in such cases where the beneficiary's life expectancy is short.Rate this question:
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- 50.
When would a misrepresentation be considered material?
- A.
When it may alter the underwriting decision
- B.
If the application is sent back to the applicant
- C.
If the underwriter discovers that the applicant lied about his age
- D.
If the application has to be voided in the presence of the producer
Correct Answer
A. When it may alter the underwriting decisionExplanation
A misrepresentation would be considered material when it has the potential to change or influence the underwriting decision. This means that if the misrepresentation is significant enough to impact the evaluation of the applicant's risk profile or affect the terms and conditions of the insurance policy, it would be considered material. The misrepresentation could involve false information provided by the applicant, such as lying about their age, which could have a direct impact on the underwriting decision.Rate this question:
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Current Version
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Aug 02, 2024Quiz Edited by
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Mar 07, 2013Quiz Created by
Gregpeck
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