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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: General Insurance | - Insurance contracts
| |
| Topic 2: Life Insurance Basics | - Types of life insurance policies
| |
| Topic 3: Insurance Regulation | 5% | - Licensing
|
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NEW QUESTION # 37
Which type of policy contains both a minimum and target premium?
Answer: C
Explanation:
Universal life insurance is a flexible-premium permanent life insurance contract in which the policyowner generally has discretion over the amount and timing of premium payments, provided sufficient policy value exists to cover mortality charges, expenses, and other deductions required to keep the contract in force.
Universal life illustrations commonly distinguish between a target premium and a minimum premium or minimum funding amount. The target premium is an insurer-determined amount intended to fund the policy according to assumed interest, mortality, expense, and benefit assumptions. It is not necessarily the minimum amount that can be accepted or the amount guaranteed to keep coverage in force indefinitely. A lower payment may be permitted if policy values are adequate, while additional funding may also be required when actual policy performance is less favorable.
Traditional whole life normally uses fixed scheduled premiums rather than a minimum-and-target premium structure. Graded-premium life uses predetermined premium increases during the early policy years.
Adjustable life permits modification of certain contract features but is not the product principally identified by minimum and target premium terminology.
Accordingly, the terminology in the question specifically identifies universal life.
Study Guide Reference: Types of Life Insurance Policies - universal life; flexible premiums; target premiums; mortality charges; cash-value funding.
NEW QUESTION # 38
Which rider allows the husband or wife of the insured to be added to the primary insured ' s policy?
Answer: B
Explanation:
A spouse term rider provides term life insurance coverage on the spouse of the person insured under the base life insurance policy. The primary insured remains covered by the underlying contract, while the spouse receives a separately stated amount of term protection through the rider.
This approach allows a family to obtain additional protection without necessarily issuing a completely separate individual policy for the spouse. Because the coverage is provided as a rider, its duration and continuation generally depend on the rider ' s contractual provisions and the status of the underlying policy.
Certain contracts may also provide conversion rights when the rider terminates.
An accelerated death benefit rider permits the insured to access part of the policy ' s death benefit during life when specified qualifying conditions occur, such as terminal illness. A guaranteed insurability rider permits the primary insured to purchase additional coverage at designated times without new evidence of insurability.
"Level term rider" describes a term benefit whose amount remains level but does not specifically identify coverage added for the insured ' s husband or wife.
The relationship described in the question therefore identifies the spouse term rider.
Study Guide Reference: Life Insurance Policy Provisions, Options, and Riders - spouse rider; family coverage; term riders; guaranteed insurability and accelerated benefits.
NEW QUESTION # 39
A policyholder has named their spouse as the primary beneficiary and their child as the contingent beneficiary. Under what circumstances will the contingent beneficiary receive the death benefit?
Answer: D
Explanation:
A contingent beneficiary, sometimes called a secondary beneficiary, receives life insurance proceeds when the primary beneficiary is unable or ineligible to receive them according to the policy ' s beneficiary provisions. The most common circumstance is that the primary beneficiary dies before the insured.
In this scenario, the spouse is the primary beneficiary and therefore has first priority to receive the death benefit if the spouse survives the insured and satisfies the policy ' s applicable requirements. The child, as contingent beneficiary, becomes entitled to the proceeds if the spouse predeceases the insured.
Whether the primary beneficiary designation is revocable does not automatically activate the contingent beneficiary. Revocability means the policyowner may ordinarily change the beneficiary without obtaining that beneficiary ' s consent. Likewise, if the primary beneficiary survives the insured, the primary beneficiary normally receives the proceeds rather than the contingent beneficiary.
A policyowner can change beneficiary designations when permitted, but the question asks when the existing contingent designation becomes operative. That occurs when the primary beneficiary cannot take the proceeds, with prior death being the classic examination example.
Study Guide Reference: Life Insurance Policy Provisions, Options, and Riders - primary and contingent beneficiaries; beneficiary succession; revocable beneficiary designations.
NEW QUESTION # 40
An insurance company is calculating the premium for a new life insurance policy. Given that the company expects to earn a 5% interest rate on invested premiums, how will this interest rate affect the premium amount?
Answer: C
NEW QUESTION # 41
In addition to the actual policy, an entire contract includes which of the following?
Answer: A
Explanation:
The entire contract provision identifies the documents that collectively constitute the enforceable life insurance contract. Ordinarily, the entire contract consists of the policy itself together with the attached application and any properly incorporated riders, endorsements, or amendments.
The significance of this provision is that the insurer cannot generally rely on undisclosed documents or external material to change the contractual obligations after issuance. When the application is attached to and incorporated into the policy, representations made in that application become part of the contractual record and may be considered when determining rights under provisions such as incontestability.
" Provisions" and "clauses" are already components contained within the policy document and therefore are not the additional document being sought by the question. A credit report may be obtained during underwriting, but it does not ordinarily become part of the insurance contract delivered to the policyowner.
This concept also protects the policyowner by establishing precisely what documentation governs the contractual relationship. For examination purposes, when asked what accompanies the policy to form the entire contract, the attached application is the standard answer.
Study Guide Reference: Life Insurance Policy Provisions, Options, and Riders - entire contract provision; application; representations; policy documents.
NEW QUESTION # 42
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