Insurance Licensing Updated Virginia-Life-Annuities-and-Health-Insurance Exam Questions and Answers by ocean

Virginia Code § 38.2-3117.1 permits life insurance policies to include an accelerated death benefit (ADB) provision, allowing the policyowner to receive a portion of the death benefit early if the insured is diagnosed with a terminal illness (typically less than 12-24 months life expectancy, per policy terms). Option B correctly identifies this benefit, often used for medical expenses or quality-of-life needs. Option A (death benefit) is paid only upon death, not during life, so it’s incorrect here. Option C (reduced paid-up insurance) is a nonforfeiture option converting cash value to a smaller, paid-up policy, unrelated to terminal illness. Option D (extended term insurance) uses cash value to extend term coverage, also not tied to life expectancy triggers. The study guide likely details ADB as a modern feature addressing critical health scenarios, distinguishing it from standard death benefits or nonforfeiture options, confirming B as the accurate choice.

In insurance contract law, per Virginia Code § 38.2-102, a contract requires consideration—something of value exchanged to make it legally binding. Option C (consideration) fits this definition: the insured’s premium payment and the insurer’s promise of coverage form the mutual value. Option A (grant) implies a unilateral transfer, not a contract element. Option B (codicil) is a will amendment, irrelevant to insurance contracts. Option D (covenant) is a promise within a contract, not the value exchanged. The study guide likely explains consideration as a foundational principle, using examples like a $500 premium for a $100,000 policy, distinguishing it from other legal terms. Virginia follows common law requiring consideration for enforceability, making C the precise answer.

Keogh plans, established under the Internal Revenue Code, are retirement plans for self-employed individuals and small businesses, also known as HR 10 plans (option B) after the 1962 legislation (H.R. 10) creating them. They allow tax-deferred contributions, similar to qualified plans. Option A (Section 457 plans) applies to government and nonprofit employees, not self-employed individuals. Option C (403(b) plans) is for nonprofit employees (e.g., teachers), distinct from Keogh’s self-employed focus. Option D (Section 2503(c) trusts) relates to gifting for minors, not retirement. The study guide likely contrasts Keogh (HR 10) with other plans in a retirement section, noting its tax benefits and eligibility, confirming B as the correct synonym.

The doctrine of reasonable expectations holds that insurance contracts will be interpreted as a reasonable person would expect, even if fine print suggests otherwise. Exact extract: “Under the principle of reasonable expectations, coverage is interpreted in line with what a prudent policyholder would believe was provided.” This prevents insurers from denying claims based on obscure or technical language.