CMFAS Life Insurance M5 2 — Questions and Answers
Question 1: What is the cash value of a life insurance policy?
- The total premiums paid
- The savings component that accumulates over time in permanent policies (Correct answer)
- The death benefit amount
- The commission paid to the agent
Correct answer: The savings component that accumulates over time in permanent policies
Cash value is the savings portion of a permanent life insurance policy that grows over time. The policyholder can borrow against or withdraw this amount.
Question 2: What is the grace period in a life insurance policy?
- The time before a policy takes effect
- The period after a premium due date during which the policy remains in force (Correct answer)
- The time to file a claim
- The cooling-off period
Correct answer: The period after a premium due date during which the policy remains in force
The grace period is typically 30 days after the premium due date, during which the policyholder can pay the overdue premium without the policy lapsing.
Question 3: What is an endowment policy?
- A pure protection policy
- A policy that combines life insurance with savings, paying out at maturity or death (Correct answer)
- A policy with no cash value
- A short-term rental insurance
Correct answer: A policy that combines life insurance with savings, paying out at maturity or death
An endowment policy combines life insurance protection with a savings element. It pays out the sum assured either at maturity or upon the insured's death, whichever comes first.
Question 4: What is the contestability period?
- The time an agent has to sell the policy
- A period (usually 2 years) during which the insurer can void a policy for misrepresentation (Correct answer)
- The period to make premium payments
- The time before the policy starts
Correct answer: A period (usually 2 years) during which the insurer can void a policy for misrepresentation
During the contestability period (usually the first 2 years), the insurer can investigate and void the policy if the insured made material misrepresentations in the application.
Question 5: What is a rider in a life insurance policy?
- A person who delivers the policy
- An additional benefit or provision added to the base policy (Correct answer)
- A type of premium payment
- A penalty clause
Correct answer: An additional benefit or provision added to the base policy
A rider is an add-on to a basic insurance policy that provides additional coverage or benefits, such as critical illness or accidental death coverage.
Question 6: What does 'sum assured' mean?
- The premium amount
- The guaranteed amount payable upon death or maturity (Correct answer)
- The cash value of the policy
- The total returns expected
Correct answer: The guaranteed amount payable upon death or maturity
The sum assured is the guaranteed minimum amount that the insurer will pay to the beneficiary upon the insured's death or at policy maturity.
CMFAS Life Insurance M5 2
What is the cash value of a life insurance policy?