CLU Life Insurance Legal Aspects 3

Question 1

Under the spendthrift clause in a life insurance settlement option, the beneficiary's interest is protected from:

Accepted Answer

Claims of the beneficiary's creditors

Answer

A spendthrift clause prevents the beneficiary's creditors from attaching proceeds held by the insurer under a settlement option before they are paid out.

Question 2

The 'facility of payment' clause in group life insurance allows the insurer to:

Accepted Answer

Pay proceeds to a relative or dependant if no beneficiary has been named

Answer

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.

Question 3

Which of the following transfers of a life insurance policy requires the insurer's written consent to be valid?

Accepted Answer

Collateral assignment

Answer

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.

Question 4

The 'entire contract' clause in a life insurance policy legally means that:

Accepted Answer

The policy and attached application constitute the complete agreement between the parties

Answer

The entire contract clause specifies that the policy and the attached application form the complete, binding contract, excluding any outside representations or documents.

Question 5

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:

Accepted Answer

10 to 30 days of delivery

Answer

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.

CLU - Chartered Life Underwriter Practice Test

CLU - Chartered Life Underwriter Practice Test

CLU Life Insurance Legal Aspects 3