Georgia Life & Health Insurance Exam — All Questions

Under an AD&D benefit, the amount paid for the accidental loss of a body part such as a hand or eye is called the:

• a.Face amount
• b.Residual benefit
• c.Principal sum
• d.Capital sum✓

In AD&D coverage, the capital sum is paid for dismemberment or loss of sight, while the principal sum is paid for accidental death. Residual benefit is a disability-income concept, and face amount is a life insurance term.

The return-of-premium rider on a life policy is funded essentially as a(n):

• a.Decreasing term rider
• b.Increasing term rider equal to the premiums paid✓
• c.Immediate annuity
• d.Paid-up whole life rider

Return of premium is achieved with an increasing term rider whose amount grows to match the cumulative premiums, so surviving the term returns those premiums. It is not decreasing term, whole life, or an annuity.

Adding a level term rider to a whole life policy lets the owner:

• a.Permanently reduce the base policy's face amount
• b.Permanently eliminate the base policy's cash value accumulation in exchange for the additional term protection
• c.Add temporary extra coverage (for example on a spouse or for a set period) at relatively low cost✓
• d.Avoid all future underwriting on the base policy

A term rider layers inexpensive, temporary coverage on top of permanent insurance, often to cover a spouse or a period of higher need. It does not shrink the base face amount, remove cash value, or waive future underwriting.

An accelerated (living) death benefit rider allows the insured to receive part of the death benefit while still alive if the insured:

• a.Changes to a higher-paying job
• b.Relocates to another region
• c.Is diagnosed as terminally or chronically ill✓
• d.Reaches normal retirement age

The accelerated death benefit advances a portion of the face amount when the insured is terminally or chronically ill, helping pay care costs. Ordinary events like a new job, retirement, or moving do not trigger it.

A long-term care rider attached to a life insurance policy generally:

• a.Pays for qualifying long-term care by drawing down the policy's death benefit✓
• b.Pays only a death benefit and nothing during life
• c.Is prohibited from being attached to life insurance
• d.Replaces the insured's Medicare coverage entirely and pays all future hospital and physician bills directly

An LTC rider accelerates the death benefit to reimburse qualifying long-term care expenses, reducing the remaining death benefit by what is used. It is a permitted living benefit, not a Medicare substitute.

A cost-of-living (COLA) rider on a life policy increases the:

• a.The guaranteed interest rate credited to the policy's cash value, raising that rate each year to match inflation
• b.Dividend scale on a participating policy
• c.Premium only, with no change to any benefit
• d.Death benefit periodically to offset inflation, usually tied to an index✓

A COLA rider raises the death benefit over time, often linked to an inflation index, so protection keeps pace with rising costs. It is not merely a premium increase, nor does it change the guaranteed interest or dividend scale.

Under the extended term nonforfeiture option, the policy's cash value is used to:

• a.Purchase a smaller amount of paid-up permanent coverage
• b.Continue the same face amount as term insurance for as long as the cash value will pay for it✓
• c.Increase the death benefit above the original face amount
• d.Provide the policyowner a lump-sum cash refund equal to the full face amount of the surrendered permanent policy

Extended term uses the cash value as a single premium to keep the same face amount in force as term insurance for a limited time. Buying a smaller paid-up amount is the reduced paid-up option, and a lump sum is cash surrender.

The reduced paid-up nonforfeiture option provides:

• a.A smaller, fully paid-up permanent policy with no further premiums due✓
• b.The same face amount but only for a limited number of years
• c.A one-time cash refund equal to the policy's surrender value, ending all of the coverage immediately
• d.A temporary term rider on a second insured

Reduced paid-up applies the cash value as a single premium to buy a smaller permanent policy that needs no more premiums and lasts for life. Keeping the same face for a limited time is extended term; a refund is cash surrender.

The automatic premium loan provision prevents a policy from lapsing by:

• a.Converting the policy to term insurance
• b.Automatically borrowing from the available cash value to pay an overdue premium✓
• c.Reducing the face amount to zero
• d.Canceling any interest owed on prior loans

The automatic premium loan quietly borrows against the cash value to cover a premium the owner failed to pay, avoiding a lapse. It does not zero out the face amount, forgive loan interest, or convert the policy.

When a policyowner requests a cash-value loan, the insurer:

• a.May refuse all policy loans at its discretion
• b.Must provide the requested policy loan at no interest and without any deduction from the available cash value
• c.May defer paying the loan for up to six months, except when the loan is used to pay a premium✓
• d.Must pay the loan within 24 hours as required by law

Insurers may delay honoring a policy loan for up to six months (a holdover from liquidity protection), except loans requested to pay premiums. They cannot generally refuse loans on a policy with cash value, and loans do bear interest.

Policy dividends from a participating life policy are generally not taxable because they are treated as:

• a.A return of overpaid premium✓
• b.A portion of the death benefit paid early
• c.A capital gain on invested premiums
• d.Interest earned on the cash value

Dividends are considered a refund of premium the policyowner overpaid, so they are not taxable income (though interest left to accumulate on them is). They are not capital gains, interest, or an early death benefit.

Electing to use policy dividends to buy paid-up additions will:

• a.Reduce the base policy's death benefit dollar for dollar as each annual dividend is applied to the contract
• b.Convert the base policy to term insurance
• c.Pay the dividends out to the owner in cash each year
• d.Purchase small amounts of additional permanent coverage that also build cash value✓

Paid-up additions use dividends to buy little blocks of fully paid permanent insurance, increasing both death benefit and cash value. This option adds coverage rather than reducing it, paying cash, or converting the policy.

The difference between the fixed-period and fixed-amount settlement options is that fixed-period:

• a.Sets the dollar amount of each payment and lets the duration vary
• b.Pays only the interest earned on the proceeds
• c.Pays a guaranteed income to the payee for their entire lifetime regardless of the amount of proceeds remaining
• d.Sets the length of time and varies the payment amount to exhaust the proceeds✓

Fixed-period fixes how long payments last and solves for the payment size; fixed-amount fixes the payment size and solves for how long the money lasts. Neither is interest-only or a life income option.

Under a life income settlement option, the size of each payment to the beneficiary depends primarily on the:

• a.Producer's commission on the policy
• b.Insured's original annual premium
• c.Beneficiary's age (life expectancy) and the amount of proceeds✓
• d.Number of policy loans that had been taken

A life income option converts the proceeds into payments for the payee's life, so the payment size is driven by the payee's life expectancy and the amount available. Premiums, loans, and commissions do not set it.

An applicant pays the initial premium with the application and receives a conditional receipt. Coverage becomes effective:

• a.As of the receipt or exam date, provided the applicant is found insurable under the insurer's standards✓
• b.Only after the policy is delivered and a second premium is paid
• c.Only after the policy's free-look examination period has completely ended and the owner has formally decided to keep the delivered contract
• d.Immediately and unconditionally, regardless of the applicant's health

A conditional receipt provides coverage retroactive to the application or exam date, but only if the applicant proves insurable as applied for; it is not a guarantee for an uninsurable applicant. Coverage does not wait for delivery or the end of the free-look.

When an application is submitted WITHOUT the initial premium, coverage generally does not take effect until:

• a.The medical examination is merely scheduled
• b.The application is signed by the applicant and the producer forwards it to the home office for underwriting review, approval, and issuance
• c.The producer mails the application to the insurer
• d.The policy is delivered, the first premium is collected, and any required statement of continued good health is obtained✓

With no premium submitted, the insurer's offer is the issued policy, and acceptance occurs at delivery when the first premium is paid and good health is confirmed. Signing, mailing, or scheduling an exam does not put coverage in force.

The consideration furnished by the applicant in a life insurance contract consists of the:

• a.Death benefit itself
• b.Application (the statements made) plus the initial premium✓
• c.Insurer's promise to pay the death benefit
• d.Producer's insurance license

The applicant's consideration is the premium and the representations made in the application; the insurer's consideration is its promise to pay. A license and the death benefit are not the applicant's consideration.

The insuring clause of a life insurance policy:

• a.States the insurer's basic promise to pay the death benefit upon the insured's death✓
• b.Lists the events the policy will not cover
• c.Sets the premium payment mode
• d.Names the servicing producer

The insuring clause is the insurer's core promise to pay the benefit when the insured dies. Exclusions, premium mode, and producer information are found in other parts of the policy.