Life Insurance Legal Aspects Flashcards
7 cards from real CLU practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Life Insurance Legal Aspects flashcards as text
Under the spendthrift clause in a life insurance settlement option, the beneficiary's interest is protected from:
Answer: Claims of the beneficiary's creditors
A spendthrift clause prevents the beneficiary's creditors from attaching proceeds held by the insurer under a settlement option before they are paid out.
The 'facility of payment' clause in group life insurance allows the insurer to:
Answer: Pay proceeds to a relative or dependant if no beneficiary has been named
The facility of payment clause permits the insurer to pay up to a specified small amount to a relative or person who paid funeral expenses when no valid beneficiary designation exists.
Which of the following transfers of a life insurance policy requires the insurer's written consent to be valid?
Answer: Collateral assignment
A collateral assignment, used to secure a loan, typically requires the insurer's acknowledgment to be valid and to establish priority of the lender's interest.
The 'entire contract' clause in a life insurance policy legally means that:
Answer: The policy and attached application constitute the complete agreement between the parties
The entire contract clause specifies that the policy and the attached application form the complete, binding contract, excluding any outside representations or documents.
Under the free-look provision mandated in most states, the policyowner has the right to return a newly issued life policy and receive a full premium refund within:
Answer: 10 to 30 days of delivery
Most states require a 10- to 30-day free-look period during which the new policyowner may return the policy for a full refund of premiums paid.
A life insurance policy settlement option under which the insurer pays interest only, with principal payable on demand or at the beneficiary's death, is called the:
Answer: Interest option
Under the interest option, the insurer retains the principal and pays periodic interest, giving the beneficiary flexibility to withdraw principal later.
Which legal doctrine holds that an insurance agent's knowledge of a material fact, obtained while acting within the scope of authority, is imputed to the insurer?
Answer: The rule of imputed knowledge (agency)
Under agency law, knowledge acquired by an agent within the scope of their authority is legally attributed to the principal (the insurer), which can prevent the insurer from later claiming ignorance.