#1
Which factor typically influences the premium amount of a life insurance policy the most?
Age of the insured
ExplanationAge directly affects the risk of mortality, thus impacting premium rates.
#2
In life insurance, what does the 'primary beneficiary' refer to?
The person who receives the policy proceeds if the insured dies
ExplanationPrimary beneficiary is the individual entitled to receive the policy proceeds upon the insured's death.
#3
In life insurance, what is the purpose of the 'grace period'?
To allow policyholders to reinstate lapsed policies without penalty
ExplanationGrace period provides a window for policyholders to revive lapsed policies without incurring penalties.
#4
What is the purpose of a beneficiary designation form in a life insurance policy?
To specify who will receive the policy proceeds upon the insured's death
ExplanationBeneficiary designation form outlines who receives policy proceeds upon the insured's demise.
#5
Which of the following factors can affect the cost of life insurance premiums?
Health condition
ExplanationHealth condition significantly influences life insurance premium costs.
#6
What is the primary purpose of life insurance?
To provide financial protection to the insured's beneficiaries in the event of death
ExplanationPrimary purpose of life insurance is to offer financial security to beneficiaries upon the insured's demise.
#7
Which settlement option allows beneficiaries to receive the policy proceeds in regular payments over a fixed period?
Fixed-period option
ExplanationFixed-period option provides beneficiaries with regular payments for a predetermined period.
#8
Which of the following is NOT a common factor used to determine life insurance premiums?
Marital status
ExplanationMarital status generally does not directly affect life insurance premium calculations.
#9
What is the purpose of a rider in a life insurance policy?
To modify or add coverage to the base policy
ExplanationRiders adjust or enhance coverage beyond the standard policy provisions.
#10
Which of the following is NOT a typical settlement option for life insurance policies?
Fixed-rate option
ExplanationFixed-rate option is not a common method for settling life insurance proceeds.
#11
What does the term 'underwriting' refer to in the context of life insurance?
The process of assessing risk and determining premiums
ExplanationUnderwriting involves evaluating risk factors to set appropriate premium rates.
#12
Which of the following factors is typically NOT considered when determining life insurance premiums?
Annual income
ExplanationAnnual income usually isn't a primary factor in calculating life insurance premiums.
#13
What is the purpose of designating a contingent beneficiary in a life insurance policy?
To receive the policy proceeds if the primary beneficiary is unable to
ExplanationContingent beneficiary receives proceeds if the primary beneficiary cannot.
#14
Which of the following statements about whole life insurance is TRUE?
It typically includes a cash value component
ExplanationWhole life insurance often accumulates cash value in addition to providing death benefits.
#15
What does the term 'accelerated death benefit' refer to in the context of life insurance?
A portion of the death benefit paid to the beneficiary while the insured is still alive
ExplanationAccelerated death benefit allows policyholders to access a portion of the death benefit if diagnosed with a terminal illness.
#16
What is the purpose of the contestability period in a life insurance policy?
To investigate the accuracy of information provided in the application
ExplanationContestability period allows insurers to verify information provided in the policy application.
#17
What happens to the policy's cash value upon the death of the insured in a permanent life insurance policy?
It is added to the death benefit paid to the beneficiary
ExplanationCash value is added to the death benefit payout for beneficiaries in permanent life insurance.
#18
In a life insurance policy, what does 'underwriting class' refer to?
The category that determines the premium rate based on the applicant's risk profile
ExplanationUnderwriting class categorizes applicants based on risk, determining premium rates accordingly.