LOMA 281 Exam with Complete
Solutions Graded A+
Extended term life insurance nonforfeiture option - Answer-policy owner can discontinue
paying premiums and use the policy's net cash surrender value to purchase term
insurance. this term insurance is for the full coverage amount provided under the
original policy for as long a term as the net cash surrender value can provide
automatic premium loan option - Answer-insurer will automatically pay an overdue
premium by making a loan against the policy's cash value, as long as the cash value
equals or exceeds the amount of premium due
Personal Property - Answer-All property not classified as real property (life insurance)
Class Designation - Answer-A beneficiary group designation (for example, all of my
children), opposed to specifying one or more beneficiaries by name.
Contingent Beneficiary - Answer-entitled to the proceeds if the primary beneficiary dies
before the insured
right of revocation - Answer-The life insurance policyowner's right to change the
beneficiary designation. (9)
Irrevocable Beneficiary - Answer-a beneficiary who has a vested interest in the policy
and therefore, the policyowner may not exercise certain rights without the consent of the
beneficiary (can't change the beneficiary)
participating policy - Answer-policyowners are entitled to dividends, which, in the case
of mutual companies, are a return of excess premiums are therefore nontaxable.
Accumulation at Interest Dividend Option - Answer-The insurance company keeps the
dividend in an account where it accumulates interest. The policy owner is allowed to
withdraw the funds at any time. The amount of interest is specified in the policy and
compounds annually. Although dividends themselves are NOT taxable, the interest on
the dividends is taxable to the policy owner when credited to the policy, whether or not
the policy owner receives the interest.
paid-up additional insurance dividend option - Answer-policy dividend used to purchase
additional coverage of the same type as the basic policy
additional term insurance dividend option - Answer-used as a net single premium to
purchase one-year term insurance (cannot exceed policy's cash value)
, interest settlement option - Answer-insurer invests proceeds and pays the interest to the
payee, typically annually
fixed-period option - Answer-the policy proceeds are paid to a beneficiary over some
fixed period of time
Life Income Option - Answer-A death benefit settlement option which provides the
beneficiary with an income that they cannot outlive. Installment payments are
guaranteed for as long as the recipient lives. The amount of each installment is based
on the recipient's life expectancy and the amount of principal.
absolute assignment - Answer-all ownership rights in the policy are transferred to a new
owner (permanent)
Collateral Assignment - Answer-Temporary Assignment in which the client pledges the
proceeds of the life insurance policy to the bank as collateral for loan or to enhance
credit standings (has vested right to only the policy's monetary values, this vested right
is limited, rights are temporary)
endorsement methods - Answer-transfers ownership without the policyowner having to
enter into a separate assignment agreement
certificate of insurance - Answer-documents that describes the coverage that the group
insurance contract provides and a group insured's rights under the contract
noncontributory plan - Answer-policyholder pays the entire premium for the coverage
(100% of eligible group members must be covered)
self-administered plan - Answer-group policyholder maintains records of groups insured
and other administrative duties
probationary period - Answer-length of time typically 1-6 months that a new group
member must wait before becoming eligible to enroll in the group insurance plan
Eligibility Period - Answer-31 days to enroll without having to provide evidence of
insurability (contributory)
actively-at-work provision - Answer-A group insurance policy provision which states
that, in order to be eligible for coverage, an employee must be actively at work—rather
than ill or on leave—on the day the insurance coverage is to take effect.
waiver of premium for payor benefit - Answer-insurer waives renewal premiums if the
policy owner, rather than the insured, dies or becomes totally disabled (must provide
evidence of insurability)
Solutions Graded A+
Extended term life insurance nonforfeiture option - Answer-policy owner can discontinue
paying premiums and use the policy's net cash surrender value to purchase term
insurance. this term insurance is for the full coverage amount provided under the
original policy for as long a term as the net cash surrender value can provide
automatic premium loan option - Answer-insurer will automatically pay an overdue
premium by making a loan against the policy's cash value, as long as the cash value
equals or exceeds the amount of premium due
Personal Property - Answer-All property not classified as real property (life insurance)
Class Designation - Answer-A beneficiary group designation (for example, all of my
children), opposed to specifying one or more beneficiaries by name.
Contingent Beneficiary - Answer-entitled to the proceeds if the primary beneficiary dies
before the insured
right of revocation - Answer-The life insurance policyowner's right to change the
beneficiary designation. (9)
Irrevocable Beneficiary - Answer-a beneficiary who has a vested interest in the policy
and therefore, the policyowner may not exercise certain rights without the consent of the
beneficiary (can't change the beneficiary)
participating policy - Answer-policyowners are entitled to dividends, which, in the case
of mutual companies, are a return of excess premiums are therefore nontaxable.
Accumulation at Interest Dividend Option - Answer-The insurance company keeps the
dividend in an account where it accumulates interest. The policy owner is allowed to
withdraw the funds at any time. The amount of interest is specified in the policy and
compounds annually. Although dividends themselves are NOT taxable, the interest on
the dividends is taxable to the policy owner when credited to the policy, whether or not
the policy owner receives the interest.
paid-up additional insurance dividend option - Answer-policy dividend used to purchase
additional coverage of the same type as the basic policy
additional term insurance dividend option - Answer-used as a net single premium to
purchase one-year term insurance (cannot exceed policy's cash value)
, interest settlement option - Answer-insurer invests proceeds and pays the interest to the
payee, typically annually
fixed-period option - Answer-the policy proceeds are paid to a beneficiary over some
fixed period of time
Life Income Option - Answer-A death benefit settlement option which provides the
beneficiary with an income that they cannot outlive. Installment payments are
guaranteed for as long as the recipient lives. The amount of each installment is based
on the recipient's life expectancy and the amount of principal.
absolute assignment - Answer-all ownership rights in the policy are transferred to a new
owner (permanent)
Collateral Assignment - Answer-Temporary Assignment in which the client pledges the
proceeds of the life insurance policy to the bank as collateral for loan or to enhance
credit standings (has vested right to only the policy's monetary values, this vested right
is limited, rights are temporary)
endorsement methods - Answer-transfers ownership without the policyowner having to
enter into a separate assignment agreement
certificate of insurance - Answer-documents that describes the coverage that the group
insurance contract provides and a group insured's rights under the contract
noncontributory plan - Answer-policyholder pays the entire premium for the coverage
(100% of eligible group members must be covered)
self-administered plan - Answer-group policyholder maintains records of groups insured
and other administrative duties
probationary period - Answer-length of time typically 1-6 months that a new group
member must wait before becoming eligible to enroll in the group insurance plan
Eligibility Period - Answer-31 days to enroll without having to provide evidence of
insurability (contributory)
actively-at-work provision - Answer-A group insurance policy provision which states
that, in order to be eligible for coverage, an employee must be actively at work—rather
than ill or on leave—on the day the insurance coverage is to take effect.
waiver of premium for payor benefit - Answer-insurer waives renewal premiums if the
policy owner, rather than the insured, dies or becomes totally disabled (must provide
evidence of insurability)
