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

The extended term nonforfeiture option uses the cash value to purchase term insurance for the full face amount ($35,000) for as long a term as the cash value allows. The face amount remains unchanged; only the term length varies.

Exact Extract (Virginia Life Insurance Study Guide): “Extended term—uses cash value to buy term insurance equal to the original face amount for a period determined by cash value.”

References (Virginia Documents / Study Guide):

— Virginia Life Insurance Examination Outline, Nonforfeiture Options

Detailed Answer in Step-by-Step Solution:

The proof of loss is a formal statement of a claim, and standard health insurance policies require it within 90 days of the loss (C), unless the policy specifies otherwise or state law extends it.

Options A (30 days) and B (60 days) are too short for most policies, while D (120 days) exceeds the typical requirement.

The Virginia study guide aligns with the NAIC model laws, stating that proof of loss must typically be filed within 90 days of the loss, though insurers may accept later submissions if not prejudicial. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Health Insurance Claims Provisions."

The return of premium benefit refunds a percentage of premiums paid if the policy is canceled or if the insured dies before benefits are used. Exact extract: “A return of premium rider provides a refund of premiums paid, less claims paid, upon cancellation or death of the insured.” This option is often added to long-term care policies to protect policyholder investment.

Virginia Code § 38.2-3205 governs policy loans in life insurance. When an insured borrows against the policy’s cash value and fails to repay the loan (principal plus interest), the outstanding amount is deducted from the death benefit upon the insured’s death. Option C correctly states this reduction. Option A is false; premiums are fixed unless the policy is adjustable, and loans don’t alter them. Option B is incorrect; dividends depend on insurer performance and policy terms, not loan repayment, though they might be applied to reduce the loan if elected. Option D is wrong; immediate lapse occurs only if the loan exceeds the cash value and premiums aren’t paid, not simply from non-repayment. The study guide likely stresses that the death benefit is the primary adjustment mechanism, ensuring the insurer recovers the loan while honoring the policy, making C the accurate choice.