PSI LIFE, ACCIDENT, AND HEALTH
PRACTICE EXAM QUESTIONS WITH
COMPLETE ANSWERS 2024 UPDATED
VERIFIED BY EXPERTS
Which of the following non-forfeiture options will allow the policy holder to be paid an
amount that is commensurate with the original policy's cash value as well as the policy
holder's age for the remainder of his or her life? - CORRECT ANSWER>>>>Single
premium immediate annuity
-Many insurance companies will allow an insured to purchase a single premium
immediate
annuity with the cash value that is in the life insurance policy. The income received from
such an
annuity will be determined based upon the amount of cash in the policy, the income
option that is chosen, and the current age and life expectancy of the annuitant.
In all cases, a life insurance policy will lapse after the end of a grace period for
nonpayment of policy premiums. - CORRECT ANSWER>>>>False
- When a policy lapses, it is terminated. This is oftentimes due to non-payment of
the policy premiums. However, if the policy holder has a non-forfeiture option on his or
her
policy, the policy may stay in-force, even though it may be altered, should the policy
holder cease paying the premium.
What type of policy rider will allow an insured to purchase an additional amount of death
benefit on their life insurance policy within 90 days of a life changing event such as
marriage or the birth of a child? - CORRECT ANSWER>>>>Advance purchase privilege
rider
- The advance purchase privilege rider allows an insured to purchase an additional
amount of death benefit within 90 days of getting married or the birth of a child. Some
insurance policies will provide the insured with 90 days of term insurance until the
insured exercises the advance purchase privilege.
Pete wanted a life insurance policy where he would have the flexibility to move funds
between the payment of the death benefit component and funding the cash value
component. Which type of life insurance should Pete consider? - CORRECT
ANSWER>>>>Universal life insurance
Universal life insurance allows the policy holder to allocate their premium payment as
they choose (within certain guidelines) between funding the amount of death benefit and
,growing the cash value component. Term life insurance does not have any type of cash
or investment component. Whole life insurance requires a set amount of premium that
goes towards paying the cost of the death benefit and funding the cash value
component.
On a whole life insurance policy, as time goes on, more of the premium goes towards
the cost of providing the ____________. - CORRECT ANSWER>>>>Death benefit
- Over time, as the insured's age increased, a larger percentage of the premium
paid will go towards the cost of providing the death benefit, and a smaller portion will go
towards the cash value component.
During the first several years of a whole life insurance policy, a smaller portion of the
premium will go towards funding which of the following? - CORRECT
ANSWER>>>>Death benefit
- In the first several years of a whole life insurance policy, a smaller percentage of
the premium paid will go towards the cost of providing the death benefit. This is
because of the insured's younger age. As the insured's age increases, a larger
percentage of the premium will be required to fund the cost of providing the death
benefit.
In essence, a whole life insurance policy combines the death benefits like a term life
policy along with a ____________. - CORRECT ANSWER>>>>Savings account
-A whole life insurance policy technically combines the death benefits that are found in a
term life plan with a savings account. There are no underlying stock or mutual fund
investments in a whole life insurance policy.
Which of the following is an additional type of coverage that can be included on a life
insurance
policy as an optional feature? - CORRECT ANSWER>>>>Riders
- Riders provide additional optional coverage features. They typically cost an extra
amount of premium, although some insurance companies provide certain riders at no
additional charge.
What is another name that is used for a life insurance policy death benefit? - CORRECT
ANSWER>>>>Face amount
- The amount of a life insurance policy's death benefit is also referred to as the
policy's face amount.
. Robert is considering purchasing life insurance as part of his retirement planning. He is
questioning how he will take care of himself and his wife if they become ill or need long-
term care services. How will they afford it if a catastrophic event occurs? As Robert's
agent, what rider should you discuss with him? - CORRECT ANSWER>>>>Accelerated
death benefit rider
,- With this rider, the insured may collect some or all of the face amount of their life
insurance policy provided that they meet the illness or long-term care qualifications. The
death benefit on the life insurance policy will subsequently be reduced by the amount
that insured withdraws.
In comparison to whole life and universal life, which of the following components in a
variable life insurance policy deem the policy as being more risky than some other types
of coverage? - CORRECT ANSWER>>>>Investment aspec
- Because the investment component of a variable life insurance policy moves up
and down with the fluctuations of the market, it can be considered more risky.
A grace period allows the premium payor a period of time to pay overdue premiums.
How long is a grace period typically? - CORRECT ANSWER>>>>30 days
- A grace period is typically 30 days. The premium payor can meet outstanding
dues within 30 days to keep the policy in force without requiring any proof of insurability.
This policy rider applies money from the cash value of a policy to cover overdue
premiums at the end of the grace period. What is the name of this rider? - CORRECT
ANSWER>>>>Automatic premium loan rider
- The automatic premium loan rider will tap the cash value of a policy to ensure it
stays in force even if the insured neglects to cover overdue premiums within the grace
period. This rider will keep a policy in force as long as the cash value available can
cover the overdue premium amount. A guaranteed insurability rider allows an insured to
increase the amount of the death benefit at certain times or milestones in their lives.
A beneficiary on a life insurance policy will receive what value upon the death of the
insured? - CORRECT ANSWER>>>>Death benefit
- The death benefit is the amount that is paid to the policy beneficiary upon the
death of the insured. Should a permanent life insurance policy holder decide to cancel
the policy prior to the insured's death, they will receive the amount of the cash surrender
value.
John, who had a life insurance policy with a death benefit, died on August 31st, after a
long bout with cancer. He had been hospitalized for a month before his death. His wife
contacted the insurance company to file her claim for the death benefit on September
5th, after John's burial, and after she had time to collect her emotions to deal with her
personal loss. The insurance agent filed the papers to process the claim with his
supervisor, and the death benefit was settled on October 30th. Were any laws violated
in this scenario? - CORRECT ANSWER>>>>Yes, the claim was not settled within 30
days of the claim.
- Although it typically takes approximately two weeks to settle death benefit claims,
insurance companies are required to settle such claims within 30 days. Some claims
may require additional time if they require additional investigation. Here, there is nothing
suspicious about John's death.
, Before a beneficiary can receive life insurance proceeds, what documents need to be
presented to the life insurance company? - CORRECT ANSWER>>>>Death certificate
Claim form
- Prior to settling a death claim, a life insurance company will require several
pieces of information. This will help in ensuring that the claim is not being fraudulently
filed.
.Death benefit claims from life insurance policies are not subject to income taxation. -
CORRECT ANSWER>>>>True
- Life insurance policy death benefits are not subject to income taxation to the
beneficiary. This is because the IRS deems that income taxation could cause undue
financial hardship to the beneficiary. It is important to note that such proceeds may be
subject to estate taxes.
Which of the following funds are received by a beneficiary free from income taxation? -
CORRECT ANSWER>>>>Death benefit
- Life insurance death benefits are received free of income taxation to the
beneficiary. Should the owner receive the cash surrender value, he would be required
to pay tax on the gain on his funds.
.In most cases, death benefit claims that are the result of an insured's suicide that arise
within ____________ of policy purchase are not normally paid. - CORRECT
ANSWER>>>>2 years
-Most insurers will not pay out life insurance claims due to an insured's suicide within
two years of policy purchase. This helps in preventing individuals from purchasing
coverage for loved ones and then immediately committing suicide to allow payment of
funds to their loved ones.
Who is the person or entity that must file the death claim? - CORRECT
ANSWER>>>>Owner
Beneficiary
- While it is the beneficiary who will receive the death benefit proceeds, it is also
typically the beneficiary who also will file the death benefit claim. However, the owner of
the policy - who is not necessarily always the insured and / or beneficiary, may also file
the death claim for the proceeds on behalf of the beneficiary.
How may life insurance proceeds be paid out? - CORRECT ANSWER>>>>Lump sum
Installments
Annuity option
- There are numerous options for the payment of life insurance proceeds to
beneficiaries. In some cases, the funds may even be left on deposit at the insurance
company.
PRACTICE EXAM QUESTIONS WITH
COMPLETE ANSWERS 2024 UPDATED
VERIFIED BY EXPERTS
Which of the following non-forfeiture options will allow the policy holder to be paid an
amount that is commensurate with the original policy's cash value as well as the policy
holder's age for the remainder of his or her life? - CORRECT ANSWER>>>>Single
premium immediate annuity
-Many insurance companies will allow an insured to purchase a single premium
immediate
annuity with the cash value that is in the life insurance policy. The income received from
such an
annuity will be determined based upon the amount of cash in the policy, the income
option that is chosen, and the current age and life expectancy of the annuitant.
In all cases, a life insurance policy will lapse after the end of a grace period for
nonpayment of policy premiums. - CORRECT ANSWER>>>>False
- When a policy lapses, it is terminated. This is oftentimes due to non-payment of
the policy premiums. However, if the policy holder has a non-forfeiture option on his or
her
policy, the policy may stay in-force, even though it may be altered, should the policy
holder cease paying the premium.
What type of policy rider will allow an insured to purchase an additional amount of death
benefit on their life insurance policy within 90 days of a life changing event such as
marriage or the birth of a child? - CORRECT ANSWER>>>>Advance purchase privilege
rider
- The advance purchase privilege rider allows an insured to purchase an additional
amount of death benefit within 90 days of getting married or the birth of a child. Some
insurance policies will provide the insured with 90 days of term insurance until the
insured exercises the advance purchase privilege.
Pete wanted a life insurance policy where he would have the flexibility to move funds
between the payment of the death benefit component and funding the cash value
component. Which type of life insurance should Pete consider? - CORRECT
ANSWER>>>>Universal life insurance
Universal life insurance allows the policy holder to allocate their premium payment as
they choose (within certain guidelines) between funding the amount of death benefit and
,growing the cash value component. Term life insurance does not have any type of cash
or investment component. Whole life insurance requires a set amount of premium that
goes towards paying the cost of the death benefit and funding the cash value
component.
On a whole life insurance policy, as time goes on, more of the premium goes towards
the cost of providing the ____________. - CORRECT ANSWER>>>>Death benefit
- Over time, as the insured's age increased, a larger percentage of the premium
paid will go towards the cost of providing the death benefit, and a smaller portion will go
towards the cash value component.
During the first several years of a whole life insurance policy, a smaller portion of the
premium will go towards funding which of the following? - CORRECT
ANSWER>>>>Death benefit
- In the first several years of a whole life insurance policy, a smaller percentage of
the premium paid will go towards the cost of providing the death benefit. This is
because of the insured's younger age. As the insured's age increases, a larger
percentage of the premium will be required to fund the cost of providing the death
benefit.
In essence, a whole life insurance policy combines the death benefits like a term life
policy along with a ____________. - CORRECT ANSWER>>>>Savings account
-A whole life insurance policy technically combines the death benefits that are found in a
term life plan with a savings account. There are no underlying stock or mutual fund
investments in a whole life insurance policy.
Which of the following is an additional type of coverage that can be included on a life
insurance
policy as an optional feature? - CORRECT ANSWER>>>>Riders
- Riders provide additional optional coverage features. They typically cost an extra
amount of premium, although some insurance companies provide certain riders at no
additional charge.
What is another name that is used for a life insurance policy death benefit? - CORRECT
ANSWER>>>>Face amount
- The amount of a life insurance policy's death benefit is also referred to as the
policy's face amount.
. Robert is considering purchasing life insurance as part of his retirement planning. He is
questioning how he will take care of himself and his wife if they become ill or need long-
term care services. How will they afford it if a catastrophic event occurs? As Robert's
agent, what rider should you discuss with him? - CORRECT ANSWER>>>>Accelerated
death benefit rider
,- With this rider, the insured may collect some or all of the face amount of their life
insurance policy provided that they meet the illness or long-term care qualifications. The
death benefit on the life insurance policy will subsequently be reduced by the amount
that insured withdraws.
In comparison to whole life and universal life, which of the following components in a
variable life insurance policy deem the policy as being more risky than some other types
of coverage? - CORRECT ANSWER>>>>Investment aspec
- Because the investment component of a variable life insurance policy moves up
and down with the fluctuations of the market, it can be considered more risky.
A grace period allows the premium payor a period of time to pay overdue premiums.
How long is a grace period typically? - CORRECT ANSWER>>>>30 days
- A grace period is typically 30 days. The premium payor can meet outstanding
dues within 30 days to keep the policy in force without requiring any proof of insurability.
This policy rider applies money from the cash value of a policy to cover overdue
premiums at the end of the grace period. What is the name of this rider? - CORRECT
ANSWER>>>>Automatic premium loan rider
- The automatic premium loan rider will tap the cash value of a policy to ensure it
stays in force even if the insured neglects to cover overdue premiums within the grace
period. This rider will keep a policy in force as long as the cash value available can
cover the overdue premium amount. A guaranteed insurability rider allows an insured to
increase the amount of the death benefit at certain times or milestones in their lives.
A beneficiary on a life insurance policy will receive what value upon the death of the
insured? - CORRECT ANSWER>>>>Death benefit
- The death benefit is the amount that is paid to the policy beneficiary upon the
death of the insured. Should a permanent life insurance policy holder decide to cancel
the policy prior to the insured's death, they will receive the amount of the cash surrender
value.
John, who had a life insurance policy with a death benefit, died on August 31st, after a
long bout with cancer. He had been hospitalized for a month before his death. His wife
contacted the insurance company to file her claim for the death benefit on September
5th, after John's burial, and after she had time to collect her emotions to deal with her
personal loss. The insurance agent filed the papers to process the claim with his
supervisor, and the death benefit was settled on October 30th. Were any laws violated
in this scenario? - CORRECT ANSWER>>>>Yes, the claim was not settled within 30
days of the claim.
- Although it typically takes approximately two weeks to settle death benefit claims,
insurance companies are required to settle such claims within 30 days. Some claims
may require additional time if they require additional investigation. Here, there is nothing
suspicious about John's death.
, Before a beneficiary can receive life insurance proceeds, what documents need to be
presented to the life insurance company? - CORRECT ANSWER>>>>Death certificate
Claim form
- Prior to settling a death claim, a life insurance company will require several
pieces of information. This will help in ensuring that the claim is not being fraudulently
filed.
.Death benefit claims from life insurance policies are not subject to income taxation. -
CORRECT ANSWER>>>>True
- Life insurance policy death benefits are not subject to income taxation to the
beneficiary. This is because the IRS deems that income taxation could cause undue
financial hardship to the beneficiary. It is important to note that such proceeds may be
subject to estate taxes.
Which of the following funds are received by a beneficiary free from income taxation? -
CORRECT ANSWER>>>>Death benefit
- Life insurance death benefits are received free of income taxation to the
beneficiary. Should the owner receive the cash surrender value, he would be required
to pay tax on the gain on his funds.
.In most cases, death benefit claims that are the result of an insured's suicide that arise
within ____________ of policy purchase are not normally paid. - CORRECT
ANSWER>>>>2 years
-Most insurers will not pay out life insurance claims due to an insured's suicide within
two years of policy purchase. This helps in preventing individuals from purchasing
coverage for loved ones and then immediately committing suicide to allow payment of
funds to their loved ones.
Who is the person or entity that must file the death claim? - CORRECT
ANSWER>>>>Owner
Beneficiary
- While it is the beneficiary who will receive the death benefit proceeds, it is also
typically the beneficiary who also will file the death benefit claim. However, the owner of
the policy - who is not necessarily always the insured and / or beneficiary, may also file
the death claim for the proceeds on behalf of the beneficiary.
How may life insurance proceeds be paid out? - CORRECT ANSWER>>>>Lump sum
Installments
Annuity option
- There are numerous options for the payment of life insurance proceeds to
beneficiaries. In some cases, the funds may even be left on deposit at the insurance
company.
