LI Part 2

Which of the following statement about accumulated interest earned on dividend from an insurance policy is true?

• it is bot taxalbe

• it is tax deductable

• it is taxed as capital gained

• It is taxed as ordinary income

Which statement regarding the Misstatement of Age provision is considered to be true?

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

• Requires that a new policy must be applied for if a misstatement of age is found on the current policy

• misstatement of age provision is valid only during the contestable period

• Insurer may void the policy if a misstatement of age is discovered

M has an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take? (Page 10)

• Collect premium from M's estate

• Deny the claim

• Pay face amount minus the past due premium

• Subtract the premium from cash value

Which of these is not considered to be a right given to a policyowner?

• Surrendering the policy's cash value

• Modify a provision in the insurance contract

• Assignment of ownership

• Change the beneficiary, if revocable

Which of these types of policies may not have the automatic premium loan provision attached to it?

• modified whole life

• 20-pay life

• decreasing term

• endowment

When is the face amount of a whole life policy paid?

• at the policy's maturity date only

• when the insured dies or at the policy's maturity date, whichever happens first

• only when the insured dies

• when the policy is surrendered

The option that provides an additional death benefit for a limited amount of time at lowest possible cost is called an

• term rider

• accidental death and dismemberment rider

• family rider

• annuity

What action will an insurer take if an interest payment on a policy loan is not made on time?

• cancel the policy if not paid within the grace period

• automatically add the amount of interest due to the loan balance

• subtract from dividends owned

• disallow any further loans

L takes out a life insurance policy and dies 10 years later. During the claim process, the insurer discovers that L had understated her age on the application. Under the Misstatement of age provision, the insurer will

• pay the death benefit in full

• adjust the death benefit to an increased amount

• adjust the death benefit to a reduced amount

• deny the claim

S would like to use dividend from her life insurance policy to purchase paid-up addition. All of these would be factors that determine how much coverage can be purchased except

• type of life insurance

• S's attained age

• dividend amount used toward purchase

• beneficiary's age