Insurance MCQ

Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early A) Dividend Accumulation option B) Paid-up option C) Accumulation at Interest D) Paid-up additions Answer: Paid-up option

If the policyowner, the insured, and the beneficiary under a life insurance policy are three different people, who has the ownership rights A) The insured and the policyowner B) Beneficiary C) Insured D) Policyowner Answer: Policyowner

An insured purchases a policy in 2008 and died in 2013. The insurance company discovers at that time that the insured concealed information during the application process. What can they do A) Sue for the right to not pay the death benefit B) Pay the death benefit C) Refuse to pay the death benefit because of the fraud D) Pay a decreased death benefit Answer: Pay the death benefit

Items stipulated in the contract that the insurer will not provide coverage for are found in the A) Exclusions clause. B) Insuring clause. C) Benefit Payment clause. D) Consideration clause Answer: Exclusions clause

Which of the following statements about a suicide clause in a life insurance policy is TRUE A) Suicide is covered as long as the policy is in force. B) Suicide is excluded as long as the policy is in force. C) Suicide is excluded for a specific period of years and covered thereafter. D) Suicide is covered for a specific period of years and excluded thereafter Answer: Suicide is excluded for a specific period of years and covered thereafter

At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called A) Guaranteed insurability. B) Waiver of cost of insurance. C) Supplemental add on. D) Cost of living Answer: Guaranteed insurability

A business owner was trying to obtain a bank loan to fund the purchase of a new business facility, but the bank required proof of additional assets to secure the loan. The business owner then decided to use her $250,000 life insurance policy to secure the loan. Which provision makes this possible A) Insurable interest B) Modification clause C) Ownership provision D) Collateral assignment Answer: Collateral assignment

The interest earned on policy dividends is A) 40% taxable, similar to a capital gain. B) Taxable. C) Nontaxable. D) Tax deductible Answer: B

Lyle has a $10,000 term life policy. He paid his annual premium on February 1. Lyle fails to renew the policy and dies on February 28 of the following year. Accounting for the $200 of earned premium, how much will the beneficiary receive from Lyle's insurance company A) $200 B) $0 C) $10,000 D) $9,800 Answer: $9,800

The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the A) Insuring clause. B) Misstatement of Age clause. C) Incontestability clause. D) Reinstatement clause Answer: Incontestability clause

Under what circumstances may a life insurance producer deliver a policy that is dated up to six months before the application was taken A) To avoid an increase in premium rate for the insured B) To meet sales quotas established by the insurer C) To make a policy effective during a period when the producer's appointment was in force D) To shorten the period of contestability Answer: To avoid an increase in premium rate for the insured

Under an extended term nonforfeiture option, the policy cash value is converted to A) A lower face amount than the whole life policy. B) A higher face amount than the whole life policy. C) The same face amount as in the whole life policy. D) The face amount equal to the cash value Answer: The same face amount as in the whole life policy

Z falls from the roof of his house while fixing it and damages his spinal column enough to render him disabled for a year. His insurance policy carries a Disability Income Benefit rider. Which of the following benefits will Z receive A) Payments for life B) Yearly premium waiver and income C) Monthly premium waiver and monthly income D) Percentage of medical costs paid by the insurer Answer: Monthly premium waiver and monthly income

An insured receives an annual life insurance dividend check. What term best describes this arrangement A) Reduction of Premium B) Annual Dividend Provision C) Accumulation at Interest D) Cash option Answer: Cash option

Which of the following statements is TRUE about a policy assignment A) It is the same as a beneficiary designation. B) It permits the beneficiary to designate the person to receive the benefits. C) It authorizes an agent to modify the policy. D) It transfers rights of ownership from the owner to another person Answer: It transfers rights of ownership from the owner to another person

When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died first. Which of the following would receive the death benefit A) The insured's contingent beneficiary B) The insurance company C) The insured's estate D) The primary beneficiary's estate Answer: The insured's contingent beneficiary

The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years A) 1 year B) 2 years C) 5 years D) 7 years Answer: 2 years

What is the waiting period on a Waiver of Premium rider in life insurance policies A) 30 days B) 3 months C) 5 months D) 6 months Answer: 6 months

All of the following are true regarding the guaranteed insurability rider EXCEPT A) The insured may purchase additional insurance up to the amount specified in the base policy. B) It allows the insured to purchase additional amounts of insurance without proving insurability only at specified dates or events. C) This rider is available to all insureds with no additional premium. D) The insured may purchase additional coverage at the attained age Answer: This rider is available to all insureds with no additional premium

What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident A) Settlement Clause B) Nonforfeiture Clause C) Common Disaster Clause D) Spendthrift Clause Answer: C