Question

14) Which of the following statements about life income settlement options is (are) true?

I. Under a joint-and-survivor life income option, payments cease at the death of the second (last) surviving) annuitant,

II. Under a life income with guaranteed period, a contingent beneficiary is guaranteed a minimum number of payments regardless of when the primary beneficiary dies.

A) I only

B) II only

C) both I and II]

D) neither I nor II

15) Bruce left a question about heart disease blank on his life insurance application because he, wanted to speak with his doctor before answering. After speaking with his doctor, he forgot to complete that question and the application was submitted. The insurance company issued the policy. Several weeks later, Bruce was speaking with his insurance agent and told the agent that Bruce did, in fact, have heart disease. Bruce died 9 months later and the insurance agent told the company he knew Bruce did have a heart condition at the time the policy was issued. The insurance company tries to deny payment on the life insurance policy. Which life insurance policy provision will require the life insurer to pay the beneficiary even though Bruce did not disclose his heart problem on the application?

A) beneficiary clause

B) entire contract clause

C) ownership clause

D) change-of-plan provision

16) Beth purchased a participating life insurance policy 15 years ago. Her life insurance needs have decreased dramatically since she purchased the policy. Beth's job situation has become uncertain and she no longer wants to continue to make premium payments on her whole life policy. Which non-forfeiture option makes sense for Beth to use?

A) extended term option

B) interest only option

C) reduced paid up option

D) paid-up additions

17) Lionel purchased a $ 200,000 ordinary life insurance policy when he was 25 years old and had significant life insurance needs. Now Lionel is 35 . His mortgage is almost paid-off, but he and his wife had two more children so his life insurance needs have increased. Due to some medical issues, Lionel is concerned he may not qualify to purchase additional life insurance. What dividend option on his current $ 200,000 policy would you recommend for Lionel?

A) accumulation at interest

B) reduced paid-up insurance

C) paid-up additions

D) extended term insurance


18) Which of the following statements is (are) false conceming settlement options?

I. A straight life annuity provides the least amount of periodic income of all the life income, options.

II. The interest only option is the most often used settlement option.

A) I only

B) 11 only

C) both I and II

D) neither I nor II

19) An insurer denied payment of the full face value of a life insurance policy to the beneficiary. The face value of the policy was $ 500,000 and the beneficiary received only $ 470.000. What could explain the reduced payment amount?

A) entire contract clause

B) the insured had an outstanding policy loan at the time of his death

C) the insured misstated his age, representing himself as older than he really was when the policy

was issued

D) both B and C could explain the payment of less than full face value

20) Which of the following statements about life insurance policy loans is (are) true?

I. Interest is not required on a life insurance policy loan, as the policyholder is borrowing his or her own money.

II. Policy loans must be repaid within 3 years or the policy will lapse.

A) I only

B) II only

C) both I and II

D) ncither I nor II

21) Which of the following statements is (are) true with respect to annuities?

I. The fundamental purpose of annuities is to replace lost income in case of premature death.

II. Annuity payments will be higher if the annuity is funded with life insurance cash value rather than outside funds.

A) I only

B) II only

C) both I and II

D) neither I nor II

22) Stan paid an insurance company $ 50,000 for a fixed annuity when he was 50 years old. At age 62, Stan plans to begin to receive payments from the insurer. There are no guarantees on the number of payments he will receive. Based on the description provided, this annuity can be described as a(n)

A) deferred annuity.

B) life annuity with guaranteed payments.

C) immediate annuity.

D) variable annuity.


23) Cassie, age 62 , paid a life insurer $ 100,000 in exchange for a life annuity of 5500 per month. If Cassie dies before receiving 180 monthly payments from the insurer, the remainder of the 180 payments will be made to a beneficiary. If Cassie dies after receiving 180 payments, no additional additional payments are made by the insurer. Cassie has purchased a(n)

B) life annuity with 15 year guarantee.

C) installment refund annuity.

D) cash refund annuity.

24) Brad funded a straight life deferred annuity by paying $ 500,000 on his 50^{\text {th }} birthday. Brad expected to receive monthly annuity payments starting at age 60, but Brad died at age 59 before any payments were made. Which of the following statements is true regarding Brad's annuity?

A) Brad's beneficiary is entitled to receive $ 500,000 upon Brad's death

B) Brad's beneficiary is entitled to receive $ 500,000, but will not receive payment until what would have been Brad's 60^{\text {th }} birthday

C) Brad's beneficiary will receive annuity payments until a total of $ 500,000 has been paid out

D) Brad's beneficiary is not entitled to any money

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Answer #1

14. C

16. C

18. A

19. D

20. D

22. A

Remember these answers could vary depending upon regulations and laws in different countries.

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