Life Insurance Flashcards
7 cards from real EXAMFX practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Life Insurance flashcards as text
A life insurance policy's 'free look' period typically lasts how long after policy delivery?
Answer: 10 days
Most states require a free look period of at least 10 days after policy delivery, during which the policyowner may return the policy for a full premium refund.
What is the purpose of the 'entire contract' clause in a life insurance policy?
Answer: It states that the policy and attached application constitute the complete agreement between insurer and policyowner
The entire contract clause specifies that the policy document along with the attached copy of the application forms the complete and binding contract between the parties.
Which type of life insurance rider provides an additional benefit if the insured dies from an accident?
Answer: Accidental death benefit rider
The accidental death benefit rider, sometimes called 'double indemnity,' pays an additional death benefit equal to the face amount if the insured dies as a result of an accident.
Under the MEC (Modified Endowment Contract) rules, what tax treatment applies to withdrawals?
Answer: Withdrawals are taxed last-in-first-out (LIFO), meaning gains are distributed first
MECs are taxed under LIFO rules, so any withdrawals are considered to come from earnings (gains) first and are subject to income tax, plus a 10% penalty if taken before age 59½.
What is a 'key person' life insurance policy designed to do?
Answer: Protect a business from financial loss due to the death of a vital employee
Key person life insurance is owned by the business and compensates the company for lost revenue, recruiting costs, and other financial losses resulting from the death of a crucial employee or owner.
Which settlement option guarantees income payments for the rest of the beneficiary's life with no refund of unused principal?
Answer: Straight life income
Straight life income (pure life annuity) provides the highest periodic payment but stops completely at the beneficiary's death, with no refund to heirs if the beneficiary dies early.
A producer who submits a life insurance application with knowledge that the applicant provided a false answer on a material question may be guilty of:
Answer: Misrepresentation
Misrepresentation occurs when a producer knowingly makes or assists in making false or misleading statements on an insurance application, which is an unfair trade practice.