1. Which of the following life insurance policies provides a 25-year-old with the most rapid growth of cash value?
A. Straight Life
B. 20-Pay Life Correct
C. Life Paid-Up at Age 65
D. Renewable Term to age 65
Explanation
A 20-Pay Life policy requires premiums to be paid for only 20 years, but the policy remains in force for life. Because premiums are higher than a Straight Life (payable for life), cash value accumulates more rapidly in the early years to reach the same endowment value at age 100. Straight Life (A) has lower premiums and slower cash value growth. Life Paid-Up at 65 (C) also accelerates cash value but not as rapidly as a 20-Pay. Renewable Term (D) has no cash value.
2. What policy may pay benefits such as cash or medical coverage needed as a result of an unexpected incident?
A. Life
B. Accident Correct
C. Long-Term Care
D. Disability
Explanation
An Accident insurance policy provides benefits (lump-sum cash or medical expense reimbursement) specifically for injuries resulting from an accident. Life (A) pays on death. Long-Term Care (C) pays for custodial care. Disability (D) replaces lost income.
3. Which of the following provisions designates the person to whom claim payments are to be made?
A. Time of Payment of Claims
B. Entire Contract
C. Notice of Claim
D. Payment of Claims Correct
Explanation
The Payment of Claims provision specifies to whom benefits will be paid (e.g., the insured, a designated beneficiary, or a medical provider). Time of Payment of Claims (A) specifies when claims will be paid. Entire Contract (B) states the policy and application constitute the whole contract. Notice of Claim (C) outlines how to report a claim.
4. An insurance company must furnish claim forms to an insured so that the insured can file:
A. a request for an endorsement to the policy
B. a request for a change in beneficiary
C. proof of coverage
D. proof of a loss Correct
Explanation
Claim forms are used to submit proof of loss, which is documentation (like medical bills or a death certificate) required by the insurer to process a claim. Endorsements (A) and beneficiary changes (B) use different forms. Proof of coverage (C) is the policy itself.
5. Which policy provides income when an insured becomes unable to work because of sickness or injury?
A. Surgical Expense
B. Major Medical
C. Disability Income Correct
D. Hospital Expense
Explanation
Disability Income insurance replaces a portion of lost income when the insured is unable to work due to sickness or injury. Surgical (A), Major Medical (B), and Hospital Expense (D) policies cover medical costs, not lost income.