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MN Life & Health practice questions

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Question 1Life Insurance Basics and Policy Types

Insurable interest in a life insurance policy must exist at which point in time?

  1. At every policy anniversary after issue
  2. At application and continuously through the policy term
  3. Only when the application is submitted Correct answer.
  4. Only when a claim is presented for payment

Explanation

Insurable interest in life insurance is measured when the contract is formed, meaning at application and policy issue. After the policy is in force the death benefit is payable even if the relationship later ends.

Question 2Life Insurance Basics and Policy Types

A life insurance premium is built primarily from which three factors?

  1. Interest, inflation, and morbidity
  2. Mortality, interest, and persistency
  3. Mortality, morbidity, and expense
  4. Mortality, interest, and expense Correct answer.

Explanation

Gross premiums rest on three assumptions: mortality (expected deaths), interest (expected earnings on reserves), and expense (operating costs and commissions). Morbidity is a health insurance concept.

Question 3Life Insurance Basics and Policy Types

Which statement accurately describes level term life insurance?

  1. Lifetime coverage with a premium that rises each year
  2. Level face amount with cash value buildup
  3. Declining face amount with a level premium
  4. Level face amount for a stated term, no cash value Correct answer.

Explanation

Level term pays a fixed face amount if the insured dies during the stated term and builds no cash value. If the insured survives the term, the contract simply expires with no benefit.

Question 4Life Insurance Basics and Policy Types

Which policy type provides lifetime coverage with a level premium and a guaranteed cash value?

  1. Annually renewable term
  2. Whole life Correct answer.
  3. Decreasing term
  4. Universal life

Explanation

Whole life is permanent coverage with a premium that stays level for the life of the contract and a cash value guaranteed in the policy. The policy is designed to remain in force to maturity.

Question 5Life Insurance Basics and Policy Types

How are life insurance death proceeds generally taxed when received by a named individual beneficiary?

  1. Fully taxable as ordinary income
  2. Taxable only to the extent proceeds exceed premiums paid
  3. Generally income tax free to the beneficiary Correct answer.
  4. Taxable as capital gain on the increase in value

Explanation

Death proceeds paid to a beneficiary are generally excluded from income tax. Estate taxation is a separate question and depends on who owned the policy at death.

Question 6Life Insurance Basics and Policy Types

Decreasing term insurance is most commonly purchased to cover which need?

  1. Estate taxes expected at death
  2. Retirement income
  3. A declining mortgage balance Correct answer.
  4. A child's future college costs

Explanation

Decreasing term keeps the premium level while the face amount steps down, mirroring a shrinking loan or mortgage balance. The benefit roughly matches the outstanding debt at any point.

Question 7Life Insurance Basics and Policy Types

Which feature distinguishes universal life from traditional whole life?

  1. A face amount that declines steadily over the policy term
  2. Coverage limited to a stated number of years with no cash value
  3. A fixed premium and a death benefit that cannot be changed
  4. Flexible premiums and an adjustable death benefit Correct answer.

Explanation

Universal life separates the policy into mortality charges, expenses, and interest credited to cash value. Within limits the owner may vary premium payments and adjust the death benefit.

Question 8Life Insurance Basics and Policy Types

The owner, the insured, and the beneficiary are three different people. Who may change the beneficiary and take a policy loan?

  1. The beneficiary
  2. The insurer
  3. The insured
  4. The owner Correct answer.

Explanation

The policyowner holds all contractual rights, including naming the beneficiary, borrowing against cash value, surrendering, and assigning the policy. The insured and beneficiary have no ownership rights unless they are also the owner.

Question 9Life Insurance Basics and Policy Types

An agent collects the initial premium and gives a conditional receipt. When does coverage take effect?

  1. Only after the policy is delivered and the first premium is paid
  2. Only after the free-look period has expired
  3. When the application is written if the applicant is insurable Correct answer.
  4. Immediately upon signing the application regardless of insurability

Explanation

A conditional receipt provides temporary coverage effective as of the application date, but only if the proposed insured meets the insurer's underwriting standards. If the applicant is not insurable, no coverage ever attached.

Question 10Life Insurance Basics and Policy Types

Which statement is accurate about return-of-premium term insurance?

  1. The policy carries a cash value equal to all premiums paid
  2. All premiums are refunded to the beneficiary at death
  3. Premiums are returned only if the policy is converted
  4. Premiums are returned at the end of the term on survival Correct answer.

Explanation

A return-of-premium term policy refunds the premiums paid if the insured outlives the term, and it costs more than basic level term to fund that refund. It does not create cash value.

Question 11Life Insurance Basics and Policy Types

What licensing requirement applies to the sale of variable life insurance?

  1. The insurer guarantees a minimum cash value
  2. The policy may be sold only through a bank
  3. A securities registration is also required Correct answer.
  4. Only a state life insurance license is required

Explanation

Variable life cash value is held in a separate account and is not guaranteed, so the contract is both insurance and a security. Producers need a life insurance license plus a securities registration.

Question 12Life Insurance Basics and Policy Types

A first-to-die joint life policy pays the face amount at which time?

  1. At the older insured's attained age 100
  2. When the first of the two insureds dies Correct answer.
  3. Only if both insureds die within the same year
  4. When both insureds have died

Explanation

A joint life or first-to-die policy pays at the first death of the insureds. A survivorship or second-to-die policy instead pays at the last death.

Question 13Life Insurance Basics and Policy Types

A policy is classified as a modified endowment contract. What is the tax consequence?

  1. The death benefit becomes fully taxable to the beneficiary
  2. Loans and withdrawals are taxed income-first Correct answer.
  3. The policy must be surrendered within 60 days
  4. Future premiums become tax deductible

Explanation

A MEC loses the first-in, first-out treatment of lifetime distributions, so loans and withdrawals are taxed as income first and may face a 10% penalty before age 59½. The death benefit itself remains income tax free.

Question 14Life Insurance Basics and Policy Types

Which statement about group term life insurance is correct?

  1. Each employee must show insurability to enroll
  2. Employees receive certificates under a master contract Correct answer.
  3. Employees may not convert coverage on leaving
  4. The death benefit is a fixed amount set by state law

Explanation

Group life is a single master contract between insurer and employer; each employee receives a certificate of coverage. Basic coverage normally requires no individual evidence of insurability.

Question 15Life Insurance Basics and Policy Types

The conversion privilege in a term policy allows the owner to do what?

  1. Convert the term policy into a health insurance policy
  2. Convert to permanent coverage without new underwriting Correct answer.
  3. Exchange the policy for its cash surrender value
  4. Reduce the face amount and keep the premium level

Explanation

Conversion lets the owner exchange term coverage for a permanent policy without proving insurability, usually at the same or a reduced face amount. The premium rises to the permanent rate.

Question 16Life Insurance Basics and Policy Types

Which statement about annually renewable term is correct?

  1. The policy builds cash value after the fifth year
  2. Renewal is guaranteed, but the premium rises with age Correct answer.
  3. The premium stays level for the life of the policy
  4. Renewal requires a new medical examination each year

Explanation

Annually renewable term guarantees the right to renew without new underwriting, but the premium is based on attained age and therefore increases at each renewal.

Question 17Life Insurance Basics and Policy Types

Modified whole life is characterized by which premium pattern?

  1. Lower early premiums that increase in later years Correct answer.
  2. Level premiums with a face amount that decreases
  3. A single premium paid at issue
  4. Premiums that rise each year for the life of the policy

Explanation

Modified whole life charges less than a standard whole life premium in the early policy years and more in later years, while still providing lifetime coverage.

Question 18Life Insurance Basics and Policy Types

Under a 20-pay whole life policy, which statement applies?

  1. Premiums end at 20 years but coverage continues for life Correct answer.
  2. Coverage ends after 20 years
  3. The policy must be converted after twenty years
  4. The face amount is paid in twenty annual installments

Explanation

Limited-pay whole life compresses premiums into a shorter period. After the twentieth premium the policy is fully paid-up, yet coverage remains in force for the insured's lifetime.

Question 19Life Insurance Basics and Policy Types

Credit life insurance is generally written in which form?

  1. A single premium deferred annuity
  2. Decreasing term insurance with the lender as beneficiary Correct answer.
  3. Whole life insurance owned by the borrower's family
  4. Increasing term insurance with the borrower as beneficiary

Explanation

Credit life is decreasing term that tracks the declining loan balance, with the lender named beneficiary so the debt is retired if the borrower dies.

Question 20Life Insurance Basics and Policy Types

A business buys key person life insurance on a vital employee. Who owns the policy and receives the proceeds?

  1. The employee owns it and the business is the beneficiary
  2. A trust owns it and the employee's estate is the beneficiary
  3. The business owns it and is the beneficiary Correct answer.
  4. The employee owns it and names a family member as beneficiary

Explanation

Key person coverage is owned by the business and payable to the business to offset the financial loss caused by the death of a critical employee.

Question 21Life Insurance Basics and Policy Types

What does the payor benefit rider do on a juvenile life policy?

  1. It increases the face amount at the child's age 21
  2. It lets the child buy more coverage without underwriting
  3. Premiums are waived if the payor dies or is disabled Correct answer.
  4. It pays the face amount if the child dies before age 21

Explanation

The payor benefit rider keeps a juvenile policy in force by waiving premiums if the adult payor dies or becomes totally disabled before the child reaches the age stated in the rider.

Question 22Life Insurance Basics and Policy Types

A 55-year-old pays a $50,000 lump sum for a $100,000 single premium whole life policy. Which statement is correct?

  1. The policy cannot be surrendered for cash
  2. The policy carries no cash value until year ten
  3. It is immediately paid-up and likely a MEC Correct answer.
  4. Premiums must continue until age 100

Explanation

One premium makes the policy immediately paid-up, and a large lump sum relative to the death benefit fails the seven-pay test. The contract is therefore a modified endowment contract, so lifetime distributions are taxed income-first.

Question 23Life Insurance Basics and Policy Types

Which statement describes a traditional endowment policy?

  1. It pays at death or at the end of the stated period Correct answer.
  2. Only the premiums paid are returned at the end of the period
  3. It provides death protection only, with no living benefit
  4. Coverage continues to age 100 regardless of the period

Explanation

An endowment pays the face amount if the insured dies during the endowment period, or to the owner if the insured survives to the end of that period. Because the living benefit equals the face amount, current tax law sharply restricts their sale.

Question 24Life Insurance Basics and Policy Types

An insured with a terminal illness receives an accelerated death benefit from her policy. How is the payment generally taxed?

  1. Excluded from income for a terminally ill insured Correct answer.
  2. Taxable as a capital gain to the recipient
  3. Taxable only to the extent it exceeds premiums paid
  4. Fully taxable as ordinary income in the year received

Explanation

Accelerated death benefits are excluded from gross income when the insured is terminally or chronically ill as defined in the tax code. Amounts paid for reasons that do not meet those definitions may be taxable.

Question 25Life Insurance Basics and Policy Types

Which statement about the Minnesota Life and Health Insurance Guaranty Association is correct?

  1. It covers policyholders of insolvent member insurers Correct answer.
  2. It guarantees the investment results of separate accounts
  3. It is funded by state tax revenue rather than by insurers
  4. It covers any insurer doing business in the state

Explanation

State guaranty associations, including Minnesota's, pay claims of insolvent member insurers up to statutory limits and are funded by assessments on member insurers. They do not guarantee investment performance and do not cover unauthorized insurers.

Question 26Life Insurance Policy Provisions, Riders, and Options

The free-look provision in a life insurance policy allows the owner to return the policy within a stated number of days after delivery. What is the purpose of this provision?

  1. To let the insurer contest the application for misrepresentation
  2. To let the owner review and cancel the contract without penalty Correct answer.
  3. To guarantee a minimum cash value in the first year
  4. To excuse the owner from paying the first premium

Explanation

The free-look provision gives the policyowner a review period, typically 10 days after delivery, during which the policy may be returned for a full refund of premium. It protects the buyer from making a hasty purchase decision. It does not extend the insurer's contest period or waive any premium owed.

Question 27Life Insurance Policy Provisions, Riders, and Options

After a life insurance policy has been in force for two years from its issue date, the incontestability clause generally stops the insurer from taking which action?

  1. Raising the premium because the insured's health has declined
  2. Charging interest on a policy loan
  3. Denying a claim because of a misstatement on the application Correct answer.
  4. Requiring proof of insurability to keep the policy in force

Explanation

The incontestability clause provides that after the contestable period, usually two years from issue, the insurer may no longer void the policy or deny a claim based on a misstatement in the application. The insurer retains the right to adjust benefits for misstatement of age or sex, which is handled by a separate provision.

Question 28Life Insurance Policy Provisions, Riders, and Options

A policyowner fails to pay a monthly premium on its due date. Under the standard grace period provision in a life insurance policy, coverage normally continues for how long?

  1. 7 days
  2. 30 or 31 days Correct answer.
  3. 60 days
  4. 15 days

Explanation

The grace period is commonly 30 or 31 days, and the policy stays fully in force during that time. If the insured dies within the grace period, the insurer pays the claim after deducting the unpaid premium. The policy lapses only if the premium is still unpaid at the end of the period.

Question 29Life Insurance Policy Provisions, Riders, and Options

The insured dies by suicide 14 months after a life insurance policy is issued. What does the typical suicide clause require the insurer to do?

  1. Pay accrued interest on the premiums held
  2. Void the policy and retain the premiums
  3. Pay the full face amount to the beneficiary
  4. Refund the premiums paid to the beneficiary Correct answer.

Explanation

The suicide clause limits the insurer's liability to a return of premiums if the insured dies by suicide within the stated period, usually two years from issue. After that period, suicide is treated like any other cause of death and the full face amount is payable.

Question 30Life Insurance Policy Provisions, Riders, and Options

The entire contract provision states that the policy and a copy of the application constitute the whole agreement. What is the practical effect of this provision?

  1. The agent may bind the insurer with oral promises made at delivery
  2. No other document is part of the contract unless it is attached to the policy Correct answer.
  3. The application is excluded from the contract entirely
  4. The insurer may amend the policy without the owner's consent

Explanation

The entire contract provision means the policy plus the attached application are the complete agreement, so nothing outside those documents is binding. It protects the policyowner from unrecorded side agreements and from unilateral changes by the insurer. Any modification must be attached and signed by an authorized officer.

Question 31Life Insurance Policy Provisions, Riders, and Options

A whole life policy lapsed 14 months ago and the owner now wants it back in force. Which requirement must generally be met to reinstate the policy?

  1. A new application with only the first modal premium due
  2. Conversion of the whole life policy to a term policy
  3. The owner must surrender the cash value accumulated before the lapse
  4. Evidence of insurability plus payment of overdue premiums with interest Correct answer.

Explanation

Reinstatement restores a lapsed policy to its original terms, but the insurer generally requires proof of insurability and payment of all overdue premiums plus interest. Any outstanding policy loan or interest is usually also repaid or restored at that time.

Question 32Life Insurance Policy Provisions, Riders, and Options

Which nonforfeiture option provides a smaller face amount of coverage that stays in force for the insured's remaining lifetime with no further premiums due?

  1. Automatic premium loan
  2. Reduced paid-up insurance Correct answer.
  3. Extended term insurance
  4. Cash surrender value

Explanation

Reduced paid-up insurance uses the net cash value as a single premium to buy a lower face amount that remains in force for life. No additional premiums are required. Extended term instead keeps the original face amount for a limited period.

Question 33Life Insurance Policy Provisions, Riders, and Options

A whole life policy includes an automatic premium loan provision. When the owner misses a premium beyond the grace period, what does this provision do?

  1. It cancels the policy and refunds the cash value
  2. It converts the policy to extended term insurance
  3. It advances the premium from cash value as a loan Correct answer.
  4. It permanently reduces the face amount by the unpaid premium

Explanation

The automatic premium loan provision authorizes the insurer to borrow from the policy's cash value to pay an unpaid premium, keeping the policy in force. The loan plus interest reduces the cash value and is deducted from any death benefit. Coverage continues as long as sufficient cash value exists.

Question 34Life Insurance Policy Provisions, Riders, and Options

An owner borrows $20,000 against a whole life policy and never repays it. The insured then dies. How does the insurer settle the claim?

  1. Only the remaining cash value is paid to the beneficiary
  2. The unpaid loan plus interest is subtracted from the proceeds Correct answer.
  3. The full face amount is paid and the loan is forgiven
  4. The claim is denied because the loan was still outstanding

Explanation

A policy loan is an advance against the policy's own value, so any unpaid balance and accrued interest are deducted from the death benefit. The beneficiary receives the face amount less that indebtedness. The loan does not void coverage as long as the policy remains in force.

Question 35Life Insurance Policy Provisions, Riders, and Options

Which settlement option pays benefits in installments for a specified number of years, with any unpaid balance going to a named beneficiary if the payee dies?

  1. Interest only
  2. Fixed period Correct answer.
  3. Straight life income
  4. Lump sum

Explanation

Under the fixed-period option, the proceeds are paid in equal installments over a chosen number of years; if the payee dies first, the remaining installments go to a contingent payee. Straight life income stops at the payee's death with nothing remaining. Interest only leaves the principal intact until withdrawn or paid out.

Question 36Life Insurance Policy Provisions, Riders, and Options

How does the interest-only settlement option work?

  1. The insurer holds the principal and pays interest to the payee Correct answer.
  2. The insurer pays the entire benefit in one payment
  3. The insurer buys a single premium annuity for the payee
  4. Equal installments continue until the proceeds are exhausted

Explanation

With the interest-only option, the insurer retains the proceeds and pays the payee periodic interest, with the principal paid later or left to a beneficiary. It provides income while preserving capital. The other options either liquidate principal or pay it out immediately.

Question 37Life Insurance Policy Provisions, Riders, and Options

A policy names the insured's spouse as primary beneficiary and the insured's children as contingent beneficiaries. The spouse dies before the insured. Who receives the death benefit?

  1. The insured's children Correct answer.
  2. The spouse's estate
  3. The insurance company
  4. The insured's estate

Explanation

A contingent beneficiary receives the proceeds if the primary beneficiary is not alive at the insured's death. Because the spouse predeceased the insured, the children take the benefit directly. The insured's estate would receive the proceeds only if no named beneficiary survived.

Question 38Life Insurance Policy Provisions, Riders, and Options

An insured names 'my children, per stirpes.' One of three children dies before the insured, leaving two children of her own. How are the proceeds distributed at the insured's death?

  1. The two surviving children split the entire benefit between them equally
  2. Survivors take one-third each; the deceased child's share passes to her children Correct answer.
  3. The full benefit goes to the insured's probate estate for distribution
  4. The deceased child's children are skipped, so the survivors take everything

Explanation

Per stirpes distribution passes a deceased beneficiary's share down that beneficiary's own line of descent. Each surviving child therefore receives one-third, and the deceased child's one-third is divided between her two children. Per capita treatment would instead divide the proceeds equally among the surviving children only.

Question 39Life Insurance Policy Provisions, Riders, and Options

What does a spendthrift clause in a life insurance policy do?

  1. Restricts the payee's ability to assign or encumber the proceeds Correct answer.
  2. Requires the insurer to pay the proceeds in a single sum
  3. Lets the payee assign the proceeds to a creditor at will
  4. Allows the owner to change the beneficiary at any time

Explanation

A spendthrift clause prevents a beneficiary from assigning, commuting, or otherwise encumbering future installment payments, and it generally shields those payments from the beneficiary's creditors. It is used with installment settlement options to preserve the income stream.

Question 40Life Insurance Policy Provisions, Riders, and Options

A waiver of premium rider on a life insurance policy is triggered when the insured does what?

  1. Becomes totally disabled for a required waiting period Correct answer.
  2. Loses a limb in an accident
  3. Is hospitalized for at least 24 hours
  4. Reaches normal retirement age

Explanation

The waiver of premium rider waives premiums when the insured becomes totally disabled and remains so through a waiting period, commonly six months. Premiums are waived retroactively to the start of the disability, and the policy continues as if paid. Disability must meet the policy's definition of total disability.

Question 41Life Insurance Policy Provisions, Riders, and Options

What does a guaranteed insurability rider let the policyowner do?

  1. Convert term coverage at the premium originally charged
  2. Buy added coverage at set ages without new evidence of insurability Correct answer.
  3. Reinstate a lapsed policy without evidence of insurability
  4. Raise the death benefit at no additional premium

Explanation

The guaranteed insurability rider gives the owner the option to purchase additional coverage at specified ages or events, regardless of health at that time. The added coverage is priced at the insured's attained age. It does not remove cost or make the increase free.

Question 42Life Insurance Policy Provisions, Riders, and Options

An insured with an accidental death benefit rider suffers a fatal heart attack while driving; the car then strikes a tree. What will the insurer most likely pay?

  1. Double the face amount, because disease and accident were both involved
  2. Only the base face amount, because the heart attack caused the death Correct answer.
  3. The face amount plus the accidental death benefit, because a crash occurred
  4. Nothing, because motor vehicle deaths are excluded from all life policies

Explanation

Accidental death benefits pay only when the accident is the direct and independent cause of death. Here the heart attack caused death, so the rider does not apply even though a collision followed. The base policy still pays the face amount.

Question 43Life Insurance Policy Provisions, Riders, and Options

A cost-of-living rider attached to a life insurance policy is intended to do what?

  1. Reduce the premium automatically as the insured ages
  2. Keep premiums level when the policy is converted
  3. Increase the death benefit in step with an inflation index Correct answer.
  4. Add long-term care coverage to a permanent policy

Explanation

A cost-of-living rider links the death benefit to a consumer price index so coverage keeps pace with inflation. The owner pays additional premium for the increases. It does not affect premium levels for conversion or add long-term care benefits.

Question 44Life Insurance Policy Provisions, Riders, and Options

An accelerated death benefit rider permits a terminally ill insured to do what?

  1. Collect a portion of the death benefit while still living Correct answer.
  2. Add family members as insureds on the same policy
  3. Exchange the policy for an annuity with no charge
  4. Stop paying premiums permanently without any condition

Explanation

The accelerated death benefit rider allows an insured with a terminal or qualifying illness to receive part of the policy's death benefit early. The amount received reduces the benefit ultimately paid to the beneficiary. It is not a premium waiver or an annuity exchange.

Question 45Life Insurance Policy Provisions, Riders, and Options

A policyowner pledges a life insurance policy to a bank as security for a loan through a collateral assignment. The insured dies before the loan is repaid. How are the proceeds distributed?

  1. The bank receives the entire death benefit
  2. The assignment is void and the beneficiary takes everything
  3. The policy is void because an ownership right was transferred
  4. The bank is repaid the loan balance and the beneficiary gets the rest Correct answer.

Explanation

A collateral assignment transfers only a limited interest, so the lender recovers the outstanding debt from the proceeds and the named beneficiary receives the remainder. Ownership of the policy is not permanently transferred as it is with an absolute assignment. Coverage remains fully in force.

Question 46Life Insurance Policy Provisions, Riders, and Options

An insurer discovers after the insured's death that the insured's age was understated on the application. What does the misstatement-of-age provision require?

  1. The benefit is adjusted to what the premium would have purchased at the true age Correct answer.
  2. The full face amount is paid because age can never be contested
  3. The policy is rescinded and only the premiums are refunded
  4. The beneficiary must pay the premium difference before collecting

Explanation

The misstatement-of-age provision lets the insurer recalculate the benefit to the amount the premium actually paid would have bought at the correct age. The contract is not voided and no extra premium is collected from the beneficiary. This provision is not limited by the two-year contestable period.

Question 47Life Insurance Policy Provisions, Riders, and Options

Which right belongs to the policyowner rather than to the beneficiary of a life insurance policy?

  1. Filing the claim after the insured dies
  2. Changing the beneficiary designation Correct answer.
  3. Receiving the death benefit at the insured's death
  4. Choosing a settlement option after the insured dies

Explanation

While the insured is living, the policyowner holds the ownership rights, including the right to name and change a revocable beneficiary, borrow against the policy, and surrender it. The beneficiary's rights arise only at the insured's death and are limited to collecting the proceeds under the terms set by the owner.

Question 48Life Insurance Policy Provisions, Riders, and Options

Assuming the same total annual premium, which premium payment mode costs the policyowner the most over a year?

  1. Semiannual
  2. Annual
  3. Quarterly
  4. Monthly Correct answer.

Explanation

Insurers add a service charge for more frequent premium payments, so the total annual outlay rises as the payment interval shortens. Monthly mode carries the highest total cost, while annual mode is the least expensive. The face amount and coverage are the same under each mode.

Question 49Life Insurance Policy Provisions, Riders, and Options

A policy contains a common disaster clause naming a contingent beneficiary. Under this clause, the contingent beneficiary receives the proceeds if the primary beneficiary dies how?

  1. Within a stated number of days, commonly 30, after the insured Correct answer.
  2. At any point before the claim is finally settled
  3. Before the insured's death is officially certified
  4. Within one year after the insured's death

Explanation

A common disaster clause requires the primary beneficiary to survive the insured by a stated period, commonly 30 days, for that beneficiary to take the proceeds. If the beneficiary dies within that period, the contingent beneficiary is paid instead. The clause prevents proceeds from passing through the primary beneficiary's estate in a simultaneous-death situation.

Question 50Life Insurance Policy Provisions, Riders, and Options

Under the consideration clause of a life insurance policy, what does the applicant give in exchange for the insurer's promise to pay?

  1. The agent's signed delivery receipt for the policy
  2. The application statements and payment of the first premium Correct answer.
  3. The insurer's agreement to pay the death benefit
  4. A promise to keep the same beneficiary permanently

Explanation

The consideration clause identifies what each party gives: the applicant's statements in the application and payment of the initial premium. Those statements are part of the basis of the contract, which is why material misrepresentations can matter. The insurer's promise to pay is the benefit received, not the applicant's consideration.