Individual Life Insurance Flashcards
7 cards from real CLU practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Individual Life Insurance flashcards as text
Which provision in a life insurance policy allows the insured to restore a lapsed policy within a specified period by paying overdue premiums plus interest?
Answer: Reinstatement provision
The reinstatement provision allows a policyholder to restore a lapsed policy, typically within 3-5 years, by paying all overdue premiums with interest and providing evidence of insurability.
A universal life insurance policy's cash value is credited with interest based on which of the following?
Answer: Current interest rates declared by the insurer
Universal life policies credit cash value with current interest rates declared periodically by the insurer, which must meet a contractually guaranteed minimum rate.
Under the incontestability clause, after what period can an insurer generally NOT contest a life insurance policy for misrepresentation?
Answer: 2 years
Most states require that life insurance policies become incontestable after 2 years, meaning the insurer cannot void the policy for misrepresentation after that period, except in cases of fraud.
Which nonforfeiture option provides the original face amount of coverage but for a shorter period than the original policy term?
Answer: Extended term insurance
Extended term insurance uses the cash value to purchase term insurance equal to the original face amount but for a shorter duration determined by the accumulated cash value.
A policyowner names a revocable beneficiary. Which statement correctly describes the policyowner's rights?
Answer: The policyowner can change the beneficiary without the beneficiary's consent
With a revocable beneficiary designation, the policyowner retains full control and may change the beneficiary at any time without obtaining the beneficiary's consent.
What is the primary purpose of the spendthrift clause in a life insurance policy?
Answer: To prevent beneficiaries from assigning or pledging their interest to creditors
The spendthrift clause protects proceeds held by the insurer under a settlement option from being attached by the beneficiary's creditors or assigned away.
Which type of life insurance policy combines a decreasing term rider with a whole life base to keep the total death benefit level while the premium remains constant?
Answer: Economatic policy
The economatic policy uses dividends to purchase one-year term insurance, keeping the total death benefit constant as the whole life base grows, all at a level premium.