Arkansas Insurance Exam for Life &
Health: Policy Provisions, Riders, &
Options Questions With Complete
Solutions !!
Which of the following factors determines the amount of each installment paid in a
Life Income Option arrangement?
AProjected income
BRecipient's health and death benefits
CProjected life insurance and health insurance
DRecipient's life expectancy and amount of principal - ANSWER-D
The recipient's life expectancy and the amount of principal determine the amount of
each installment paid in the Life Income Option arrangement.
An insured receives an annual life insurance dividend check. What term best
describes this arrangement?
AReduction of Premium
BAnnual Dividend Provision
CAccumulation at Interest
DCash option - ANSWER-D
The cash option allows an insurer to send the policyholder an annual, nontaxable
dividend check.
A provision in a life insurance policy that provides for the early payment of some
portion of the policy face amount should the insured suffer from a terminal illness or
injury is called
AViatical Settlement provision.
BAutomatic premium loan provision.
CWaiver of maturity provision.
DAccelerated Benefit provision. - ANSWER-D
The accelerated payment can be made in a lump sum or in monthly installments
over a special period of time. This provision is given without an increase in premium.
Some companies, however, deduct an interest charge from the proceeds paid out to
make up for their loss earnings.
Which of the following applies to the free look privilege?
AIt allows the insured 10 days to pay the initial premium.
BIt can be waived only by the insurance company.
CIt is granted only at the option of the agent.
DIt permits the insured to reject the policy with a full refund. - ANSWER-D
A policyowner may return a policy, for any reason, during the free look period and
receive a full refund.
,Which two terms are associated directly with the premium?
AFixed or variable
BTerm or permanent
CRenewable or convertible
DLevel or flexible - ANSWER-D
A level premium is one in which the premium payment never changes. A flexible
premium is found in Universal life policies where the insured changes their premium
payment.
Which provision of a life insurance policy states the insurer's duty to pay benefits
upon the death of the insured, and to whom the benefits will be paid?
ABeneficiary clause
BConsideration clause
CInsuring clause
DEntire contract clause - ANSWER-C
The insuring clause states that the insurer agrees to provide life insurance for the
named insured which will be paid to a designated beneficiary when proof of loss is
received by the insurer. It states the party to be covered by the policy and names of
the beneficiary who will receive the policy proceeds in the event of the insured's
death. If no beneficiary is named, the policy proceeds will be paid to the insured's
estate.
Which is true about the cash surrender nonforfeiture option?
AFunds exceeding the premium paid are taxable as ordinary income.
BAfter the cash surrender, the insured is covered for a grace period of 1 month.
CThe policy remains active for some time after the policyholder opts for cash
surrender.
DThe policyholder receives the original cash value of the policy. - ANSWER-A
The insurers surrender the policy at its current cash value. Only any excess of value
is taxable as income. Once the policyholder opts for cash surrender, the policy is
immediately inactive.
M is the owner of a $225,000 life policy with a triple indemnity rider for accidental
death. When M is killed in a car accident, it is determined that the accident was his
fault and that he was intoxicated at the time of the accident. The triple indemnity rider
in M's policy specifies that the death must not be contributed to by the insured in any
manner. In this case, the beneficiary will receive
A$225,000.
B$675,000 (triple the amount of policy value).
C$0.
D$112,500 (50% of the policy value). - ANSWER-A
The triple indemnity accidental death rider obligates the company to pay three times
the face amount of the policy if the insured dies as a result of an accident. The death
must be accidental and not contributed to by any other factors and must occur within
90 days of the accident. Since M contributed to his death, the triple indemnity rider is
void, but the beneficiary will still receive the policy's face amount.
What is the benefit of choosing extended term as a nonforfeiture option?
AIt allows for coverage to continue beyond maturity date
BIt can be converted to a fixed annuity
, CIt has the highest amount of insurance protection
DIt matures at age 100 - ANSWER-C
Under this option the insurer uses the policy cash value to convert to term insurance
for the same face amount as the former permanent policy. The duration of the new
term coverage lasts for as long a period as the amount of cash value will purchase.
All of the following are dividend options EXCEPT
AFixed period installments.
BAccumulated at interest
CReduction of premium.
DPaid-up additions. - ANSWER-A
Fixed period installments option is not one of the dividend options.
When a policy is surrendered for its cash value
AIt can be reinstated by paying back all policy loans and premiums
BIt can only be reinstated as a term policy
CCoverage ends and the policy cannot be reinstated.
DCoverage ends but the policy can be reinstated at anytime - ANSWER-C
Once the cash surrender value option is selected, the coverage is terminated and
the policy cannot be reinstated.
An insured has had a life insurance policy that he purchased 3 years ago when he
was 40 years old. He is killed in an automobile accident and it is discovered that he
is actually 45 years old, and not 43, as stated on the application. What will the
company do?
APay the full death benefit and refund excess premium
BPay a reduced death benefit
CPay the full death benefit
DPay nothing; there was a misrepresentation on the application - ANSWER-B
The incontestability clause prevents an insurer from denying a claim due to
statements in an application after the policy has been in force for 2 years. However,
it does not apply to statements relating to age, sex and identity.
Which of the following is true about the premium on the children's rider in a life
insurance policy?
AIt decreases when an adopted child is added to the policy.
BIt remains the same no matter how many children are added to the policy.
CIt decreases when the oldest child reaches the age of 21.
DIt increases when a newborn baby is added to the policy. - ANSWER-B
The premium does not change on the inclusion of additional children; it is based on
an average number of children.
Z falls from the roof of his house while fixing it and damages his spinal column
enough to render him disabled for a year. His insurance policy carries a Disability
Income Benefit rider. Which of the following benefits will Z receive?
APayments for life
BYearly premium waiver and income
CMonthly premium waiver and monthly income
DPercentage of medical costs paid by the insurer - ANSWER-C
Health: Policy Provisions, Riders, &
Options Questions With Complete
Solutions !!
Which of the following factors determines the amount of each installment paid in a
Life Income Option arrangement?
AProjected income
BRecipient's health and death benefits
CProjected life insurance and health insurance
DRecipient's life expectancy and amount of principal - ANSWER-D
The recipient's life expectancy and the amount of principal determine the amount of
each installment paid in the Life Income Option arrangement.
An insured receives an annual life insurance dividend check. What term best
describes this arrangement?
AReduction of Premium
BAnnual Dividend Provision
CAccumulation at Interest
DCash option - ANSWER-D
The cash option allows an insurer to send the policyholder an annual, nontaxable
dividend check.
A provision in a life insurance policy that provides for the early payment of some
portion of the policy face amount should the insured suffer from a terminal illness or
injury is called
AViatical Settlement provision.
BAutomatic premium loan provision.
CWaiver of maturity provision.
DAccelerated Benefit provision. - ANSWER-D
The accelerated payment can be made in a lump sum or in monthly installments
over a special period of time. This provision is given without an increase in premium.
Some companies, however, deduct an interest charge from the proceeds paid out to
make up for their loss earnings.
Which of the following applies to the free look privilege?
AIt allows the insured 10 days to pay the initial premium.
BIt can be waived only by the insurance company.
CIt is granted only at the option of the agent.
DIt permits the insured to reject the policy with a full refund. - ANSWER-D
A policyowner may return a policy, for any reason, during the free look period and
receive a full refund.
,Which two terms are associated directly with the premium?
AFixed or variable
BTerm or permanent
CRenewable or convertible
DLevel or flexible - ANSWER-D
A level premium is one in which the premium payment never changes. A flexible
premium is found in Universal life policies where the insured changes their premium
payment.
Which provision of a life insurance policy states the insurer's duty to pay benefits
upon the death of the insured, and to whom the benefits will be paid?
ABeneficiary clause
BConsideration clause
CInsuring clause
DEntire contract clause - ANSWER-C
The insuring clause states that the insurer agrees to provide life insurance for the
named insured which will be paid to a designated beneficiary when proof of loss is
received by the insurer. It states the party to be covered by the policy and names of
the beneficiary who will receive the policy proceeds in the event of the insured's
death. If no beneficiary is named, the policy proceeds will be paid to the insured's
estate.
Which is true about the cash surrender nonforfeiture option?
AFunds exceeding the premium paid are taxable as ordinary income.
BAfter the cash surrender, the insured is covered for a grace period of 1 month.
CThe policy remains active for some time after the policyholder opts for cash
surrender.
DThe policyholder receives the original cash value of the policy. - ANSWER-A
The insurers surrender the policy at its current cash value. Only any excess of value
is taxable as income. Once the policyholder opts for cash surrender, the policy is
immediately inactive.
M is the owner of a $225,000 life policy with a triple indemnity rider for accidental
death. When M is killed in a car accident, it is determined that the accident was his
fault and that he was intoxicated at the time of the accident. The triple indemnity rider
in M's policy specifies that the death must not be contributed to by the insured in any
manner. In this case, the beneficiary will receive
A$225,000.
B$675,000 (triple the amount of policy value).
C$0.
D$112,500 (50% of the policy value). - ANSWER-A
The triple indemnity accidental death rider obligates the company to pay three times
the face amount of the policy if the insured dies as a result of an accident. The death
must be accidental and not contributed to by any other factors and must occur within
90 days of the accident. Since M contributed to his death, the triple indemnity rider is
void, but the beneficiary will still receive the policy's face amount.
What is the benefit of choosing extended term as a nonforfeiture option?
AIt allows for coverage to continue beyond maturity date
BIt can be converted to a fixed annuity
, CIt has the highest amount of insurance protection
DIt matures at age 100 - ANSWER-C
Under this option the insurer uses the policy cash value to convert to term insurance
for the same face amount as the former permanent policy. The duration of the new
term coverage lasts for as long a period as the amount of cash value will purchase.
All of the following are dividend options EXCEPT
AFixed period installments.
BAccumulated at interest
CReduction of premium.
DPaid-up additions. - ANSWER-A
Fixed period installments option is not one of the dividend options.
When a policy is surrendered for its cash value
AIt can be reinstated by paying back all policy loans and premiums
BIt can only be reinstated as a term policy
CCoverage ends and the policy cannot be reinstated.
DCoverage ends but the policy can be reinstated at anytime - ANSWER-C
Once the cash surrender value option is selected, the coverage is terminated and
the policy cannot be reinstated.
An insured has had a life insurance policy that he purchased 3 years ago when he
was 40 years old. He is killed in an automobile accident and it is discovered that he
is actually 45 years old, and not 43, as stated on the application. What will the
company do?
APay the full death benefit and refund excess premium
BPay a reduced death benefit
CPay the full death benefit
DPay nothing; there was a misrepresentation on the application - ANSWER-B
The incontestability clause prevents an insurer from denying a claim due to
statements in an application after the policy has been in force for 2 years. However,
it does not apply to statements relating to age, sex and identity.
Which of the following is true about the premium on the children's rider in a life
insurance policy?
AIt decreases when an adopted child is added to the policy.
BIt remains the same no matter how many children are added to the policy.
CIt decreases when the oldest child reaches the age of 21.
DIt increases when a newborn baby is added to the policy. - ANSWER-B
The premium does not change on the inclusion of additional children; it is based on
an average number of children.
Z falls from the roof of his house while fixing it and damages his spinal column
enough to render him disabled for a year. His insurance policy carries a Disability
Income Benefit rider. Which of the following benefits will Z receive?
APayments for life
BYearly premium waiver and income
CMonthly premium waiver and monthly income
DPercentage of medical costs paid by the insurer - ANSWER-C
