LOMA 281 Module 3 exam questions with answers, Exams of Insurance law

Download LOMA 281 Module 3 exam questions with answers and more Exams Insurance law in PDF only on Docsity! LOMA 281 Module 3 exam questions with answers Waiver of premium for disability (WP) Benefit - ANSWER: ✔✔A supplemental life insurance policy benefit under which the insurer promises to give up—to waive—its right to collect premiums that become due while the insured is totally disabled. - satisfies a 3-6 month waiting period: meaning for the first 3-6 months the person must cover it The WP benefit typically defines total disability for the insured as being unable to perform the duties of? a. Any occupation b. The insured's own previous occupation c. Any occupation for which the insured is reasonably suited by education, training, or experience - ANSWER: ✔✔C. Waiver of premium for payor benefit - ANSWER: ✔✔A supplemental life insurance policy benefit which provides that the insurance company will waive the right to collect a policy's renewal premiums if the policyowner dies or becomes totally disabled. To add a waiver of premium for payor benefit to a life insurance policy, who do you think must be insurable? a. The insured b. The policyowner c .Both the insured and the policyowner d. Neither the insured or the policyowner - ANSWER: ✔✔C. Wavior of premium for disability benefits compared - ANSWER: ✔✔Insurer waives policy premiums if the insured becomes totally disabled. Designed for policies in which the policyowner is also the policy's insured Total disability defined as • The insured's inability to perform the essential duties of her own occupation OR any other occupation for which she is reasonably suited by education, training, or experience. Wavior of premium for payor benefit compared - ANSWER: ✔✔Insurer waives policy premiums if the policyowner dies or becomes totally disabled. Designed for third-party policies in which the policyowner is not the policy's insured Total disability defined as • The policyowner's inability to perform the essential duties of her own occupation during the first two years of disability • The policyowner's inability to perform the essential duties of any occupation for which she is reasonably entitled by education, training, or experience after the first two years of disability Disability Income Benefit - ANSWER: ✔✔A supplemental life insurance policy benefit that provides a monthly income benefit to the policyowner-insured if she becomes totally disabled while the policy is in force. - 3- 6 month waiting period - some for riders provide a partially disabled benefit Identify the supplemental disability benefit rider with its example. The UL insurance policy Drew Stephens owns on his life includes a rider that will pay him a monthly benefit if he becomes totally disabled. c. $150,000 - ANSWER: ✔✔C. Kevin Walter was the policyowner-insured of a $75,000 life insurance policy that included a typical $75,000 accidental death and dismemberment (AD&D) benefit rider. While his policy was in force, Mr. Walter, who had been diagnosed with terminal stomach cancer, died in a traffic accident. If Mr. Walter from the previous question had survived the accident but had lost one arm and one leg, the benefit rider would have provided him with a dismemberment benefit of a. 0 b. $75,000 c. $150,000 - ANSWER: ✔✔B. accelerated death benefit (living benefit) - ANSWER: ✔✔A supplemental life insurance policy benefit which provides that a policyowner may elect to receive all or part of the policy's death benefit before the insured's death if certain conditions are met. Also known as a living benefit. - typically over 100k: - payment reduces death benefit to the beneficiary - usually, paid in a lump sum that is 25% to 75% of the policy face amount Terminal illness (TI) benefit - ANSWER: ✔✔A supplemental life insurance policy benefit under which the insurer pays a portion of the policy's death benefit to a policyowner if the insured is suffering from a terminal illness and has a physician-certified life expectancy less than a stated time, generally 12 or 24 months. - ti benefits are commonly used to pay for medical care, living expenses, or outstanding debts, they can be used for any purpose, such as travel expense two other forms of accelerated death benefits: - dread disease benefit - long-term care insurance benefit dread disease (dd) benefit - ANSWER: ✔✔(critical illness benefit) pays a portion of a policy's face amount if the insured suffers from one of several diseases listed in the benefit's contract wording. - the benefit can be paid in a lump sum or in installments over 6 to 12 months An insured becomes eligible for DD benefits when he or she has a disease or undergoes a medical procedure identified as a DD in the supplementary benefit. Which of the following diseases or procedures do you think typically qualifies an insured for DD benefits? (Choose all that apply.) a. Life-threatening cancer b. Acquired Immune Deficiency Syndrome (AIDS) c. Diabetes d. End-stage kidney failure e. Heart attack f. Stroke g. Multiple sclerosis h. Coronary bypass surgery - ANSWER: ✔✔A, B, D, E, F, & H Long-term care (LTC) Insurance Benefit - ANSWER: ✔✔An accelerated death benefit under which the insurer agrees to pay a monthly benefit to a policyowner if the insured requires constant care for a medical condition. - premiums on basic life insurance polciy and the ltc benefit rider waived while insured receives ltc - waiting period-typically 90 days - monthly LTC benefit-stated as a percentage of policy face amount such as 2 percent - payments stop when specified percetage (50 to 100 percent) of policy benefit has been paid out Accelerated death benefits are payable only after the death of the policyowner-insured. a. True b. False - ANSWER: ✔✔B. - Accelerated death benefit riders provide that, under certain conditions, a policyowner can receive all or part of the policy's death benefit before the insured's death Identify the type of accelerated death benefit to its example. Kyle Zabriski's accelerated death benefit rider will pay him because he is suffering from kidney failure, which is an affliction specified in the rider. A. Dread disease benefit rider B. Long-term care benefit rider C. Terminal illness benefit rider - ANSWER: ✔✔A. Identify the type of accelerated death benefit to its example. Andrew Wise's accelerated death benefit rider will pay him because he requires constant nursing home care due to advanced Alzheimer's disease. The monthly benefit will equal 2 percent of the policy's face amount. A. Dread disease benefit rider B. Long-term care benefit rider C. Terminal illness benefit rider - ANSWER: ✔✔B. Identify the type of accelerated death benefit to its example. Michelle Young's accelerated death benefit rider will pay her because her attending physician has certified that she has a life expectancy of less than 12 months. A. Dread disease benefit rider B. Long-term care benefit rider C. Terminal illness benefit rider - ANSWER: ✔✔C. coverage is based on the second insured's own risk characteristics. The second insured can be the spouse or some other relative of the primary insured. Under a children's insurance rider, the premium amount charged for each coverage unit varies with the number of children covered and their ages. a. True b. False - ANSWER: ✔✔B. The premium charged for each coverage unit is a stated amount, regardless of the number of children covered and their ages. Under which type of rider is the additional coverage not related to the coverage provided under the basic policy? a. Spouse and children's insurance rider b. Children's insurance rider c. Second insured rider - ANSWER: ✔✔C.- The amount of additional coverage under the second insured rider is not related to the coverage under the basic policy. The additional coverage under the spouse and children's insurance rider and the children's insurance rider is based on the coverage units of the basic policy. The premium for children's coverage under a spouse and children's insurance rider increases proportionately with each additional child. a. True b. False - ANSWER: ✔✔B. The premium for the children's coverage under a spouse and children's insurance rider is a specified, flat amount that does not change with the number of children. Additional children are covered automatically at no extra premium after they reach the age of 15 days. Juvenile Inusrance - ANSWER: ✔✔- protecting Childs insurability. - child will be able to purchase life insurance off of this - important to have ability to get future insurance locked in when they were the healthiest and its cheap Guaranteed Insurability (GI) benefit - ANSWER: ✔✔A supplemental life insurance policy benefit that gives the policyowner the right to purchase additional insurance of the same type as the basic life insurance policy—for an additional premium amount—on specified option dates (typically every three years) during the life of the policy without supplying evidence of the insured's insurability. Also known as a guaranteed insurability option (GIO). GI Benefit - Benefit amount limited to policy face amount or a specific amount such as $10,000, whichever is less - May allow purchase of additional insurance at certain events, such as birth of child - Option usually ends at age 40 - Option is automatic, but purchase is not With a GI benefit, does the policyowner need to do anything to receive the additional insurance coverage? a. Yes b. No c. Sometimes - ANSWER: ✔✔A. The purchase of additional insurance coverage does not happen automatically. The policyowner must purchase the coverage on a specified option date.Usually, if the policyowner skips purchasing additional coverage on an option date, that opportunity is lost forever. The policyowner can still purchase coverage on the next option date. Paid-up additions option benefit - ANSWER: ✔✔A supplemental life insurance policy benefit that allows the owner of a whole life insurance policy to purchase single-premium paid-up additions to the policy on stated dates in the future without providing evidence of the insured's insurability. paid-up additions option benefit - Policyowner does not need to provide evidence of the insured's insurability - Premiums for the paid-up additions are based on the insured's age at the time of purchase - Paid-up additions have a cash value - The policyowner has to exercise the option; the purchase doesn't happen automatically - If the policyowner doesn't exercise the option for a certain number of years, the option terminates, but the purchased additions remain in force An insured needs to show evidence of insurability to purchase additional insurance under which of these benefits? a. GI benefit b. Paid-up additions option benefit c. Both benefits d. Neither benefit - ANSWER: ✔✔D. A policyowner must provide evidence of the insured's insurability to add a guaranteed insurability (GI) or paid-up additions rider to an in-force policy. But, once the rider is in force, no new evidence of insurability is necessary to purchase the additional insurance. Ray Novak is the policyowner-insured of a $100,000 whole life insurance policy. A rider attached to his policy gives him the right to purchase $20,000 of additional whole life insurance on specific dates without providing evidence of insurability. The rider that allows Ray to purchase the additional insurance on specific dates is known as a a. guaranteed insurability benefit b. second insured benefit - ANSWER: ✔✔A. The guaranteed insurability benefit gives the policyowner the right to purchase additional insurance of the same type as the underlying life insurance policy— whole life, in this case. A second insured rider provides term insurance on the life of someone other than the policy's insured. Ray Novak is the policyowner-insured of a $100,000 whole life insurance policy. A rider attached to his policy gives him the right to purchase $20,000 of additional whole life insurance on specific dates without providing evidence of insurability. If Ray doesn't purchase $20,000 of additional whole life coverage on every option date, his GI rider will be canceled, and he will have no additional options for purchasing coverage. a. true b. false - ANSWER: ✔✔B. Under most GI riders, if the policyowner does not exercise the option on a specified date,that option is lost forever, although the policyowner can still exercise the next option when it comes due. A paid-up additions option rider will terminate if the policyowner does not exercise the purchase option for a stated number of years. a. Denise Rand's application indicated that she broke her left leg. Actually, it was her right leg. b. Jack Anthony's application stated that, on August 20th, he had a routine physical. Actually, he was being treated for heart disease. c. Sam Prada's application stated that he had seen the doctor on January 9th. Actually, it was January 10th. d. Morty Brennan's application indicated that he saw the doctor for treatment of a skin condition. Actually, he was being treated for diabetes. - ANSWER: ✔✔B & D - The applications of Jack Anthony and Morty Brennan contain material misrepresentations because they did not disclose the serious conditions for which they visited their doctors. The misrepresentations of Denise Rand and Sam Prada are unlikely to change an insurer's evaluation of the risk and so wouldn't be material misrepresentations. incontestability provision - ANSWER: ✔✔An insurance and annuity policy provision that describes the time limit within which the insurer has the right to avoid the contract on the ground of material misrepresentation in the application. - 2 year contestable period and after that it is incontestbale fraudulent misrepresentation - ANSWER: ✔✔A misrepresentation that was made with the intent to induce the other party to enter into a contract and that did induce the innocent party to enter into the contract. Remember Jack Anthony, who said he had a routine physical but was actually being treated for heart disease? Well, Jack died five years after buying a policy with a typical incontestability provision. While processing the claim, the insurer discovered the material misrepresentation in Jack's application. What do you think happened with Jack's claim? a. The insurer denied the claim for life insurance benefits b. The insurer paid only a portion of the death benefit to the beneficiary c. The insurer paid the full amount of the death benefit to the beneficiary d. I'm not sure. - ANSWER: ✔✔D. - In most states, an insurer can challenge a policy's validity on the basis of fraudulent misrepresentation even after the expiration of the policy's contestable period. Jack appears to have made fraudulent misstatements in his insurance application. The insurer will evaluate Jack's case and determine whether to contest the claim or pay the death benefit to the beneficiary. In his application for a life insurance policy with the Star Life Insurance Company, Louis Kahn indicated no disease or disorder of the lungs. In fact, Mr. Kahn was being treated for tuberculosis. Star issued Mr. Kahn the policy, which contained a typical incontestability provision. Mr. Kahn died from tuberculosis one year after the policy was issued and his beneficiary promptly submitted a claim. Star discovered the material misrepresentation while evaluating the death claim. In this case, the contestable period a. has expired b. has not expired - ANSWER: ✔✔B. In his application for a life insurance policy with the Star Life Insurance Company, Louis Kahn indicated no disease or disorder of the lungs. In fact, Mr. Kahn was being treated for tuberculosis. Star issued Mr. Kahn the policy, which contained a typical incontestability provision. In this situation, Star most likely a. must pay the death benefit b. can avoid the contract - ANSWER: ✔✔B. - In this case, the contestable period has not expired, and Star most likely can avoid the contract. grace period provision - ANSWER: ✔✔An insurance policy provision that specifies a length of time following each renewal premium due date within which the premium may be paid without loss of coverage. - usually 30 or 31 days - the coverage is in effect during the grace period - if the premium is not paid by end of grace period, the policy lapses What happens if the insured dies during the grace period without having paid the premium that was due? a. The insurer denies the claim and pays nothing to the beneficiary. b. The insurer denies the claim but returns all premiums paid for the coverage. c. The insurer pays the claim after deducting the amount of the unpaid premium from the benefit payable. - ANSWER: ✔✔C. Coverage is still in effect during the grace period, so the insurer pays the policy benefit to the beneficiary. However, the insurer can deduct the amount of the unpaid premium from the benefit. UL policy grace period - ANSWER: ✔✔In a universal life policy, the grace period provision applies when the cash value is insufficient to meet policy's monthly mortality and expense charges. So, for a UL policy, if the grace period starts when the - Cash value is less than the mortality and expense charge, then the grace period is 61 or 62 days - Cash value equals zero, then the grace period is 30 or 31 days reinstatement - ANSWER: ✔✔The process by which an insurer puts back into force a life insurance policy that either has been terminated because of nonpayment of renewal premiums or has been continued under the extended term or reduced paid-up insurance nonforfeiture option. reinstatement provision - ANSWER: ✔✔An individual life insurance policy provision that describes the conditions that the policyowner must meet to put back into force a life insurance policy that either has been terminated because of nonpayment of renewal premiums or has been continued under the extended term or reduced paid-up insurance nonforfeiture option. - Original policy usually cannot have been surrendered - Policy loan must be repaid or reinstated Which condition usually is necessary for reinstatement? - The policyowner MUST have surrendered policy. - The policyowner MUST NOT have surrendered policy. - The policyowner MUST NOT have a policy loan outstanding. - ANSWER: ✔✔B. mortality and expense (M&E) charges. On June 1, the cash value of Janine's policy is zero. The grace period for Janine's policy begins on that date. If Janine from the previous example dies during the grace period without having made a payment, the insurer will deduct the amount of overdue M&E risk charges from the policy proceeds. a. true b. false - ANSWER: ✔✔A. Because Janine's policy is still in the grace period, the insurance coverage is still in force. Therefore, the insurer will pay the policy proceeds but will first deduct the amount of overdue M&E risk charges. Select each true statement about the reinstatement provision. (Choose all that apply) a. Reinstatement usually isn't available if policy was surrendered for its cash value b. Reinstatement puts original policy back in effect; insurer does not issue a new policy c. Conditions to reinstate include completing a reinstatement application, providing evidence of insurability, paying a specified amount of money, and repaying any policy loan plus interest (or reinstatement of loan with the policy) - ANSWER: ✔✔A, B & C Misstatement of age or sex provision - ANSWER: ✔✔A life insurance or annuity policy provision that describes the action the insurer will take to adjust the amount of the policy benefit in the event that the age or sex of the insured is incorrectly stated. before death: - If discovery of a misstatement occurs before the insured's death, the policyowner has the option of either paying—or receiving a refund of—any difference in the premium amount caused by the misstatement. after death: - If discovery of a misstatement occurs after the insured's death, the insurer adjusts the face amount to the benefit the policy premiums would have purchased for the insured's correct age or sex. Seamus Rafferty was the policyowner-insured of a $100,000 whole life insurance policy issued by the Shamrock Life Insurance Company. The application lists Mr. Rafferty's age as 45. While processing Mr. Rafferty's death claim, Shamrock discovered he was actually 50 when he purchased the policy. To account for the misstatement of Mr. Rafferty's age, Shamrock most likely will pay the beneficiary an amount that is a. Less than the policy's face amount b. More than the policy's face amount - ANSWER: ✔✔A. - Shamrock most likely will reduce the policy's face amount to what the premiums paid would have purchased for a male insured age 50. As a result, the policy beneficiary will receive less than the policy's face amount. Antoinette Childe is the policyowner-insured of a $100,000 whole life insurance policy issued by Shamrock. Shamrock has recently discovered that Ms. Childe overstated her age by 5 years on her insurance application. Ms. Childe is still alive. Shamrock most likely will refund Ms. Childe an amount that is equal to the difference in premiums paid and what she should have paid had her age had been stated correctly on the application. a. true b. false - ANSWER: ✔✔A. - Because Ms. Childe is still living, Shamrock will most likely refund her an amount that represents the overpayment of premium caused by the misstatement. Policy loan provision - ANSWER: ✔✔A cash value life insurance provision that specifies the terms on which the policyowner can obtain a loan against the policy's cash value. - can borrow up to the amount of the policy's cash value less one year's interest on the loan. Features of policy loans: - Only applicable to cash value policies - The insurer does not do a credit check -The insurer charges interest, usually annually -The interest rate may be fixed or may vary with economic conditions (often guaranteed not to be more than a stated maximum rate) - No repayment schedule for policy loan balance or accrued interest - The insurer subtracts any outstanding loan balance plus accrued interest from the death benefit or cash surrender value Policy withdrawal provision - ANSWER: ✔✔A universal life insurance policy provision that permits the policyowner to reduce the amount of the policy's cash value by withdrawing up to the amount of the cash value in cash. Also known as a partial surrender provision. - no interest charged - cash value is reduced by the amount of the withdrawal - withdrawal fee may be charged - number of withdrawals each year may be limited Amanda Kensington has taken out a policy loan. Select each true fact about this situation. a. Amanda is legally obligated to repay the loan. b. The insurance company charges interest on the loan. c. The insurance company performed a credit check on Amanda before approving the policy loan. - ANSWER: ✔✔B. - The insurance company does charge interest on the loan, usually annually. However, a borrower is not legally obligated to repay a policy loan, and unlike with a bank loan, there is no credit check on the borrower of a policy loan. Amanda Kensington from our previous example is insured by a $50,000 cash value life insurance policy. Disregarding any accrued interest, if Amanda dies with a policy loan of $4,000 outstanding, what death benefit will the policy's beneficiary receive? a. $46,000 b. $50,000 avation exclusion - ANSWER: ✔✔Aviation Exclusion Insurers may apply an aviation exclusion if the insured engages in military aviation, pilots experimental aircraft, or is a pilot or crew member on a privately owned plane. When a policy's automatic premium loan (APL) provision is activated, the insurer automatically pays an overdue premium by making a loan against the policy's cash value until the insured dies, regardless of when death occurs. a. True b. False - ANSWER: ✔✔B. - When an automatic premium loan provision is activated, the insurer automatically pays an overdue premium by making a loan against the cash value for as long as the cash value equals or exceeds the premium due. Select the causes of death that life insurance policies might exclude from coverage. Choose all that apply. a. Death resulting from suicide 6 months after policy issue b. Death as a result of war c. Death resulting from mountain climbing d. Death of a passenger on a commercial airplane that crashed e. Death of the pilot of a private airplane f. Death resulting from suicide within 3 years of policy issue - ANSWER: ✔✔A, B, C, & E property - ANSWER: ✔✔A bundle of rights a person has with respect to something. - a life insurance policy is a type of property There are two primary categories of property: real property and personal property. Which type of property is a life insurance policy? a. Real property b. Personal property - ANSWER: ✔✔B. Real property - ANSWER: ✔✔Land and whatever is growing on or attached to the land. Personal property - ANSWER: ✔✔All property other than real property. - life insurance policy is a personal property - personal property can be tangible or intangible intangible property - ANSWER: ✔✔Property that represents ownership of a legal right, such as a contractual right. - a life insurnace policy is intangible because it provides the owner with legal rights that have value and courts can enforce tangible property - ANSWER: ✔✔needs to have a physical form such as cars or clothing ownership of property - ANSWER: ✔✔The sum of all the legal rights that exist in a piece of property. What ownership rights does a life insurance policyowner have? (Choose all that apply) a. Name the beneficiary of the policy b. Change the beneficiary of the policy c. Transfer ownership of the policy to someone else d. Determine the insured's risk classification - ANSWER: ✔✔A, B, & C - A policyowner has the right to name and change the beneficiary and transfer ownership of the policy. The insurer, not the policyowner, determines the insured's risk classification. Submit Beneficiary designation - ANSWER: ✔✔n a life insurance policy identifies who will receive the policy's proceeds at the death of the insured. The beneficiary of a life insurance policy can be - a named individual - an estate - a trust - a corporation - a charitable organization class designation - ANSWER: ✔✔A beneficiary designation that identifies a certain group of persons, rather than naming each person. primary beneficiaries - ANSWER: ✔✔The party designated to receive the policy proceeds following the death of the insured. Also known as first beneficiary. contingent beneficiaries - ANSWER: ✔✔The party named to receive the policy proceeds if the primary beneficiary should die before the insured. Sometimes referred to as a secondary beneficiary or successor beneficiary. Ira Shulman had a $50,000 policy on his own life. His primary beneficiary was his wife, Myna, and his contingent beneficiaries were his sons, Abraham and Daniel, equally. Ira was survived by his wife and both sons. Who gets the policy benefit? a. Myna b. Abraham c. Daniel d. Abraham and Daniel - ANSWER: ✔✔A. Robin McNamara had a $200,000 life insurance policy on his own life. His primary beneficiary was his wife, Elise, and his contingent beneficiaries were his children, Emma and William, equally. Both Elise and William died several years before Robin died. Who gets the policy benefit? a. Robin's estate b. Elise's estate c. William's estate d. Emma - ANSWER: ✔✔D. Leigh Komesar had a $500,000 life insurance policy on her own life. Her primary beneficiaries were her daughters, Sonja and Alyssa, equally, and her contingent beneficiary was her husband, Bradley. Sonja died several years before Leigh, who was survived by Alyssa and Bradley. Who gets the policy benefit? a. Sonja's estate b. Alyssa capital - ANSWER: ✔✔An amount of money that a company's owners invested in the company, usually through the purchase of company stock. surplus - ANSWER: ✔✔For an insurer, the amount by which the company's assets exceed its liabilities and capital. policy dividends - ANSWER: ✔✔An amount of money that is considered to be a return of a portion of the premium a policyowner paid to the company in a policy year in which the company 's financial results were positive. dividend options - ANSWER: ✔✔Specified methods by which the owner of a participating life insurance policy or participating annuity may receive policy dividends. cash dividend option - ANSWER: ✔✔A policy dividend option under which the insurance company sends the policyowner a check in the amount of the policy dividend that was declared. premium reduction dividend option - ANSWER: ✔✔A policy dividend option under which the insurer applies policy dividends toward the payment of renewal premiums. policy loan repayment dividend option - ANSWER: ✔✔A policy dividend option under which the insurer applies policy dividends toward the repayment of an outstanding policy loan. accumulation at interest dividend option - ANSWER: ✔✔A policy dividend option under which the policy dividends are left on deposit with the insurer to accumulate at interest. - can withdraw part or all at any time - beneficiary would recive dividends if he was not the policy owner paid-up additional insurance dividend option - ANSWER: ✔✔A policy dividend option under which the insurer uses any declared policy dividend as a net single premium to purchase paid-up additional insurance on the insured's life; the paid-up additional insurance is issued on the same plan as the basic policy and in whatever face amount the dividend can provide at the insured's attained age. - additional term insurance dividend option - ANSWER: ✔✔A policy dividend option under which the insurer uses each policy dividend as a net single premium to purchase one-year term insurance on the insured's life. - term cannot exceed the policy cash value If the policyowner has not chosen a policy dividend option, most insurers have a default option in their policies known as an automatic dividend option. What do you think is the most common automatic dividend option? a. Cash option b. Premium reduction option c. Policy loan repayment option d. Accumulation at interest option e. Paid-up additional insurance option f. Additional term insurance option - ANSWER: ✔✔E- Policies typically specify the paid-up additional insurance option as the automatic dividend option. settlement options provision - ANSWER: ✔✔A life insurance policy provision that grants a policyowner or a beneficiary several choices as to how the insurance company will distribute the proceeds of a life insurance policy. settlement options - ANSWER: ✔✔Alternative methods that the owner or beneficiary of a life insurance policy can elect for receiving payment of the policy proceeds. Also known as optional modes of settlement. - can be revocable or irrevocable Payee - ANSWER: ✔✔The person or entity who receives the periodic income payments according to the terms of an annuity contract. contingent payee - ANSWER: ✔✔The person or other entity who will receive any remaining annuity payments upon the death of the payee. settlement options - ANSWER: ✔✔- interest option - fixed period option - fixed-amount option - life income option interest option - ANSWER: ✔✔A life insurance policy settlement option under which the insurance company invests the policy proceeds and periodically pays interest on those proceeds to the payee. fixed- period option - ANSWER: ✔✔A life insurance policy settlement option under which the insurance company agrees to pay policy proceeds in equal installments to the payee for a specified period of time. fixed-amount option - ANSWER: ✔✔A life insurance policy settlement option under which the insurance company pays equal installments of a stated amount until the policy proceeds, plus the interest earned, are exhausted. Life income option - ANSWER: ✔✔A life insurance policy settlement option under which the insurance company agrees to pay the policy proceeds in periodic installments over the payee's lifetime. straight life annuity - ANSWER: ✔✔Periodic benefit payments continue throughout the annuitant's lifetime and cease at his death. life income annuity with period certain - ANSWER: ✔✔Guarantees that annuity benefits will be paid throughout the annuitant's life and for at least a certain period, even if the annuitant dies before the end of that period. Life income annuity with refund - ANSWER: ✔✔Provides annuity benefits throughout the annuitant's lifetime and guarantees that at least the purchase price of the annuity will be paid in benefits. Joint and survivor annuity - ANSWER: ✔✔Provides a series of payments to two or more individuals and those payments continue until both or all of the individuals die.