LIFE INSURANCE LICENSE
COMPREHENSIVE TEST PAPER QUESTIONS
AND ANSWERS VERIFIED GRADED A+
●● what makes an insurance policy unilateral?
Answer: only the insurer is legally bound
●● Legal purpose
Answer: is an example of the insureds consideration
●● Consideration
Answer: the element that shows each party is giving something of value
●● Contract of Adhesion
Answer: the insured must accept the entire contract with all of its terms
and conditions
●● Absolute Assignment
Answer: - The transfer is irrevocable and the assignee receives full
control of the policy. - The assignee can even change the beneficiary
without the beneficiary's permission, unless otherwise stated.
,●● Collateral Assignment
Answer: The policy is assigned to a creditor as security, or collateral, for
a debt.
If the insured dies, the creditor is entitled to be reimbursed out of the
benefit proceeds for the amount owed.
●● the only way an insured could access the policy's cash value while
living is
Answer: through a policy loan or policy surrender
●● The suicide provision protects the insurer against what?
Answer: the purchase of a policy in contemplation of suicide
●● The insurance company reserves the right to make an adjustment if
Answer: the age if the insured is misstated.
●● If the insured was younger than the policy showed
Answer: the amount of proceeds would increase
●● if the insured was older than the policy indicated
Answer: the amount of proceeds would be decreased
●● cash value policy
,Answer: authorizes the insurer to withdraw from the policy's cash value
the amount of overdue premium if the premium has not been paid by the
end of the grace period
●● Beneficiary Designation
Answer: the party named in the policy to receive the policy proceeds
●● Settlement Options
Answer: Choices available to the insured/owner for distribution of
insurance proceeds.
●● discretionary provision
Answer: Gives discretionary authority to the insurer when determining
the eligibility of an insured for benefits under the policy; designed to
protect the insurance company
●● exclusions
Answer: can be stated in the policy itself or attached as riders
●● Results Clause (War Clause)
Answer: No coverage if death is the result of war declared or
undeclared. If death occurs during the period of war, only the premiums
are refunded.
, ●● The most common types of exclusions are
Answer: war, aviation, hazardous occupations or hobbies, felonies, and
suicide
●● Cash Surrender
Answer: Upon surrendering the policy back to the insurer, the policy
owner will receive the cash surrender value stated in the policy less any
outstanding loans and accrued interest. Any amount that exceeds the
premiums paid into the policy will be taxable as ordinary income. The
insured no longer has insurance coverage if this option is selected.
●● Level Term
Answer: premiums and death benefits stay the same for the life of the
policy
●● A divisible surplus results and the company can return to the
policyowners a part of the premiums if
Answer: fewer insureds have died than was estimated
●● Policy Dividends
Answer: - Are not taxable income as they are considered a return of
premiums paid
- Shareholders receive dividends in stock companies (taxable)
COMPREHENSIVE TEST PAPER QUESTIONS
AND ANSWERS VERIFIED GRADED A+
●● what makes an insurance policy unilateral?
Answer: only the insurer is legally bound
●● Legal purpose
Answer: is an example of the insureds consideration
●● Consideration
Answer: the element that shows each party is giving something of value
●● Contract of Adhesion
Answer: the insured must accept the entire contract with all of its terms
and conditions
●● Absolute Assignment
Answer: - The transfer is irrevocable and the assignee receives full
control of the policy. - The assignee can even change the beneficiary
without the beneficiary's permission, unless otherwise stated.
,●● Collateral Assignment
Answer: The policy is assigned to a creditor as security, or collateral, for
a debt.
If the insured dies, the creditor is entitled to be reimbursed out of the
benefit proceeds for the amount owed.
●● the only way an insured could access the policy's cash value while
living is
Answer: through a policy loan or policy surrender
●● The suicide provision protects the insurer against what?
Answer: the purchase of a policy in contemplation of suicide
●● The insurance company reserves the right to make an adjustment if
Answer: the age if the insured is misstated.
●● If the insured was younger than the policy showed
Answer: the amount of proceeds would increase
●● if the insured was older than the policy indicated
Answer: the amount of proceeds would be decreased
●● cash value policy
,Answer: authorizes the insurer to withdraw from the policy's cash value
the amount of overdue premium if the premium has not been paid by the
end of the grace period
●● Beneficiary Designation
Answer: the party named in the policy to receive the policy proceeds
●● Settlement Options
Answer: Choices available to the insured/owner for distribution of
insurance proceeds.
●● discretionary provision
Answer: Gives discretionary authority to the insurer when determining
the eligibility of an insured for benefits under the policy; designed to
protect the insurance company
●● exclusions
Answer: can be stated in the policy itself or attached as riders
●● Results Clause (War Clause)
Answer: No coverage if death is the result of war declared or
undeclared. If death occurs during the period of war, only the premiums
are refunded.
, ●● The most common types of exclusions are
Answer: war, aviation, hazardous occupations or hobbies, felonies, and
suicide
●● Cash Surrender
Answer: Upon surrendering the policy back to the insurer, the policy
owner will receive the cash surrender value stated in the policy less any
outstanding loans and accrued interest. Any amount that exceeds the
premiums paid into the policy will be taxable as ordinary income. The
insured no longer has insurance coverage if this option is selected.
●● Level Term
Answer: premiums and death benefits stay the same for the life of the
policy
●● A divisible surplus results and the company can return to the
policyowners a part of the premiums if
Answer: fewer insureds have died than was estimated
●● Policy Dividends
Answer: - Are not taxable income as they are considered a return of
premiums paid
- Shareholders receive dividends in stock companies (taxable)
