Florida Life & Health Insurance Exam — All Questions
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The incontestability provision in a life insurance policy provides that after the policy has been in force for a stated period (typically two years), the insurer:
- a.May cancel the policy for any reason
- b.Cannot void the policy or deny a claim due to a misstatement on the application, except in cases of fraud where allowed by law✓
- c.Must double the death benefit
- d.May raise the premium based on the insured's health
The incontestability clause bars the insurer from contesting the policy (voiding it or denying a claim) based on misstatements in the application once it has been in force for the contestable period, usually two years, giving beneficiaries certainty. It does not let the insurer cancel at will, nor does it increase the death benefit or permit premium increases based on health. Its purpose is to protect the insured/beneficiary from having a long-standing policy challenged over an old application error.
The grace period provision in a life insurance policy means that if a premium is not paid on its due date:
- a.The policy stays in force for a set period (such as 30 days) during which the overdue premium can still be paid✓
- b.The policy immediately lapses with no coverage
- c.The insurer must refund all prior premiums
- d.The death benefit is permanently reduced
The grace period keeps coverage in force for a specified time after the premium due date (commonly 30 or 31 days), so a late-paying policyowner does not lose protection; if the insured dies during the grace period, the death benefit is paid minus the premium owed. The policy does not lapse immediately, so the second option is wrong. The insurer is not required to refund prior premiums, and the death benefit is not permanently reduced simply because a payment was late.
A policyowner surrenders a whole life policy and elects to receive the accumulated cash value in a lump sum. This is an example of exercising which type of option?
- a.A dividend option
- b.A settlement option
- c.A nonforfeiture option✓
- d.A policy loan
Nonforfeiture options govern what a policyowner may do with the guaranteed cash value if the policy is surrendered or lapses; the three standard choices are cash surrender, reduced paid-up insurance, and extended term insurance. Dividend options apply to how dividends from a participating policy are used. Settlement options determine how the death benefit (or surrender proceeds) is paid out over time to a payee. A policy loan borrows against cash value without surrendering the policy, so coverage continues; here the owner is giving up the policy for cash.
A rider that keeps a life insurance policy in force by paying the premiums for the policyowner if the insured becomes totally disabled is called the:
- a.Accidental death benefit rider
- b.Guaranteed insurability rider
- c.Cost-of-living rider
- d.Waiver of premium rider✓
The waiver of premium rider excuses the policyowner from paying premiums (the insurer pays them) while the insured is totally disabled, usually after a waiting period, keeping the policy fully in force. The accidental death benefit rider pays an additional amount if death results from an accident. The guaranteed insurability rider lets the owner buy additional coverage at set times without new evidence of insurability. The cost-of-living rider increases the death benefit to keep pace with inflation. Only waiver of premium addresses paying premiums during disability.