insurance exam 2

The sole beneficiary of a life insurance policy dies before the insured. If the policyowner fails to change the beneficiary before the insured's death, the proceeds of the policy will go to?

• The beneficiary's estate.

• Probate.

• The state.

• The insured's estate

Answer explanation

In the absence of a viable beneficiary, proceeds will be paid to the estate of the insured.

A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change?

• Value Adjustment Rider

  
  

• Return of Premium Rider

• Cost of Living Rider

• inflation rider

Answer explanation

The Cost of living rider annually adjusts the policy's face value in accordance with the national rate of inflation or deflation. This rider adjusts the face amount of the policy to correspond with the rate of inflation, in order to keep the initial value of the policy constant over time.

Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called?

• Common errors

• Fraudulent statements

• warranties

• Material misrepresentations

All of the following would be eligible to establish a Keogh retirement plan EXCEPT?

• the president and employee of a family corporation

• A sole proprietor of a service station who employs four employees.

• A sole proprietor of film development store with no employees

• A hair dresser who operates her business at her house.

  
  

Answer explanation

Keogh plans are for self-employed individuals and their employees

An insured decides to surrender his $100,000 Whole Life policy. The premiums paid into the policy added up to $15,000. At policy surrender, the cash surrender value was $18,000. What part of the surrender value would be income taxable?

• $15,000

• $50,000

• $18,000

  
  

• $3,000

In insurance, an offer is usually made when

• An agent explains a policy to a potential applicant.

  
  

• 
  An applicant submits on application to the Insurer.

  
  

• The agent hands the policy to the policyholder.

  
  

• The insurer approves the application and receives the initial premium.

  
  

Answer explanation

In insurance, the offer is usually mode by the applicant in the form of the application. Acceptance takes place when an Insurance underwriter approves the application and issues a policy

All of the following statements are true regarding group insurance except

• Small group such as labor unions are eligible

• Participants in the policy each receive policy

• The group sponsor is the policyholder.

  
  

• Participants in a group Insurance pian are issued certificates of insurance.

Who might receive dividends from a mutual insurer?

• Policyholders

• Subscribers

• Agents

  
  

• Stockholders

partnership buy be agreement in which each partner purchases insurance on the life of each of the other partners is called a

• cross purchase plan

• stock redemption plan

• key person plan

• split dollar plan

Which option is being utilized when the insurer accumulates dividends or interest and then uses the accumulated  dividends, plus interest, and the policy cash value to pay the policy up early?

• Paid-up additions

  
  

• Paid-up option

  
  

• Accumulation at Interest