EXAMFX Life Insurance 2

Question 1

Which life insurance policy provision allows the policyowner to reinstate a lapsed policy within a specified period?

Accepted Answer

Reinstatement provision

Answer

The reinstatement provision allows a policyowner to restore a lapsed policy, typically within 3 years, by paying overdue premiums with interest and providing evidence of insurability.

Question 2

What is the primary difference between a universal life policy and a whole life policy?

Accepted Answer

Universal life offers flexible premiums and adjustable death benefits while whole life has fixed premiums

Answer

Universal life insurance provides premium and death benefit flexibility, allowing policyowners to adjust both within certain limits, unlike the fixed structure of whole life policies.

Question 3

Under which settlement option does the insurer retain the death benefit principal and pay only interest to the beneficiary?

Accepted Answer

Interest only option

Answer

The interest only option allows the insurer to hold the death benefit proceeds and pay periodic interest to the beneficiary, who can later elect another settlement option.

Question 4

A life insurance applicant is diagnosed with a terminal illness after submitting the application but before the policy is issued. The insurer should:

Accepted Answer

Deny the application based on the material change in health

Answer

A terminal illness diagnosed after application but before policy issuance is a material change that the insurer can use to deny coverage, since insurability must exist at the time of policy delivery.

Question 5

Which of the following describes a 'spendthrift clause' in a life insurance policy?

Accepted Answer

It prevents beneficiaries from assigning or pledging the death benefit proceeds

Answer

A spendthrift clause protects death benefit proceeds from the beneficiary's creditors and prevents the beneficiary from assigning or pledging those proceeds before receipt.

(EXAMFX) Exam FX Insurance Practice Test

(EXAMFX) Exam FX Insurance Practice Test

EXAMFX Life Insurance 2