#1
Which of the following factors typically influences life insurance premiums?
Age
ExplanationAge is a key determinant of life insurance premiums due to its correlation with mortality risk.
#2
What does 'beneficiary designation' refer to in life insurance?
The individual who receives the death benefit
ExplanationBeneficiary designation specifies who receives the death benefit upon the insured's death.
#3
What is the purpose of underwriting in the context of life insurance?
To determine the premium amount
ExplanationUnderwriting assesses risk factors to determine appropriate premium amounts for life insurance policies.
#4
Which of the following is NOT typically considered when calculating life insurance premiums?
Number of children
ExplanationThe number of children is typically not a factor considered when calculating life insurance premiums.
#5
What is the purpose of a life insurance policy's 'grace period'?
To provide a period for premium payment after the due date without penalty
ExplanationThe grace period allows policyholders to make premium payments after the due date without facing penalties or lapses in coverage.
#6
In life insurance, what is 'term life insurance' primarily designed for?
To provide coverage for a specific period
ExplanationTerm life insurance offers coverage for a specified term or duration.
#7
What does the term 'accelerated death benefit' refer to in life insurance?
A benefit that accelerates the death benefit payment if the insured is diagnosed with a terminal illness
ExplanationThe accelerated death benefit allows policyholders diagnosed with a terminal illness to receive a portion of the death benefit while still alive.
#8
In life insurance, what is the function of a 'cash value' component?
It serves as an investment component that accumulates over time.
ExplanationThe cash value component allows for cash accumulation over time and may be utilized during the policyholder's lifetime.
#9
What happens if a life insurance policyholder fails to designate a beneficiary?
The death benefit goes to the policyholder's estate.
ExplanationWithout a designated beneficiary, the death benefit is paid to the policyholder's estate.
#10
What is the main difference between term life insurance and permanent life insurance?
Term life insurance has a cash value component, while permanent life insurance does not.
ExplanationTerm life insurance provides coverage for a specified term and includes a cash value component, unlike permanent life insurance.
#11
What is a 'revocable beneficiary' in life insurance?
A beneficiary whose designation can be changed by the policyholder
ExplanationA revocable beneficiary can be changed at the discretion of the policyholder.
#12
What is the main advantage of a 'joint life insurance policy'?
It provides coverage for multiple lives under one policy
ExplanationJoint life insurance policies cover multiple individuals under a single policy, providing convenience and potentially lower premiums.
#13
In life insurance, what does the 'conversion privilege' allow a policyholder to do?
Convert term life insurance into permanent life insurance without evidence of insurability
ExplanationThe conversion privilege permits policyholders to switch from term life insurance to permanent life insurance without undergoing a new health evaluation.
#14
What is a 'paid-up insurance' option in life insurance?
An option to stop paying premiums while keeping coverage active
ExplanationThe paid-up insurance option allows policyholders to cease premium payments while maintaining the policy's coverage.
#15
Which of the following is NOT a common type of life insurance beneficiary designation?
Group beneficiary
ExplanationGroup beneficiary is not a typical beneficiary designation in life insurance policies.
#16
What happens to the premium payment in a life insurance policy with a 'waiver of premium' provision if the insured becomes disabled?
The premium payment is waived by the insurance company.
ExplanationIn case of disability, the insurance company waives premium payments as per the policy's waiver of premium provision.
#17
What is the purpose of the 'incontestability clause' in a life insurance policy?
To prevent the insurance company from voiding the policy after a certain period
ExplanationThe incontestability clause prevents the insurer from challenging the validity of the policy after a specified period, providing assurance to the policyholder.
#18
What does 'reinstatement' refer to in the context of a life insurance policy?
The process of renewing a lapsed policy to its original status
ExplanationReinstatement involves restoring a lapsed life insurance policy to its original status, typically requiring payment of overdue premiums and fulfilling other conditions.
#19
Which of the following factors is NOT typically considered when determining life insurance premiums?
Driving record
ExplanationDriving record is typically not a factor considered when calculating life insurance premiums.